Retail sales in the US for February came out a bit better than expected, especially when looking at the revisions. While the surprise wasn’t big, it served as another sign that QE3 isn’t coming today.
Strong figures from Europe didn’t help the common currency. EUR/USD dropped below support, and aims to reach the round number of 1.30. Updates.
Headline US retail sales rose by 1.1%, as expected. This came on top a revision of last month’s rise from 0.4% to 0.6%, so the total volume in both January and February is higher than expected.
Core retail sales rose by 0.9%, marginally better than 0.8% that was predicted. Also here, last month’s figure was revised from +0.7% to 1.1%.
Both figures aren’t huge surprises, yet the publication set EUR/USD falling. The pair lost the 1.3080 line that provided support earlier in the week, and reached 1.3052, the lowest level since February 16th.
The round 1.30 line provides only minor support. Much stronger support is at 1.2945. 1.3080 switches to resistance now. For more lines, see the EUR/USD forecast.
In Europe, things aren’t so bad today. The highly regarded German ZEW Economic Sentiment surprised by leaping from 5.4 to 22.3 points, much higher than 10.6 that was expected. The all-European (though less significant) figure also exceeded expectations and rose to 11 points.
A final approval to the second Greek bailout is expected tomorrow, with a decision on the IMF contribution scheduled for Thursday.
The big event of today remains the Fed decision. The good retail sales number adds to the signs that QE3 will not be launched. The great jobs report on Friday, that saw an addition of nearly 300K jobs (including revisions) showed that the US recovery is gaining traction.
The Fed is likely to leave policy unchanged. Nevertheless, it has two more options in the middle. Here are 4 scenarios for the Fed decision, and the possible impact on the dollar.
