• Analysts expect a stronger dollar
  • Word of caution on retail sales
  • EUR at risk today over Greece
  • CAD may not able to keep up

After a strong rally on Friday, everyone is asking will the US dollar pickup more?  The short and easy answer is yes.  I think the dollar will go much higher this year. However, the pickup may not start this week.

Of course, a difficult challenge for those who forecast currency movements is correctly estimating when the expected movements will happen.  And for the dollar, most analysts are expecting this Thursday’s February Retail Sales Report will likely be that spark that pushes the dollar to new highs.

match-9 graph 1

 

The market is expecting a pick-up of 0.8 percent month-on-month in retail sales in February. This will be welcoming news since retail sales declined in January and December despite improving job market conditions and low gas prices.

march-9 graph 2

I usually find myself running the herd and not taking on contrarian market outlooks.  However, I remain cautious this week. The recent Fed and Personal Income and Spending data suggest that consumers have been increasing their saving instead of spending their extra income.  As a result, there is a good chance that the market will be disappointed on Thursday, and the dollar could give back some of its gains this week.  Stay tuned.

EUR-USD has plunged into an 11-year-plus territory and risks falling deeper.  The Eurogroup will be meeting today to review Greece’s 11-page proposal of budget reforms to be implemented as part of its bailout extension agreement.  If there is no acceptance, then the euro crisis could return as fast as it receded.  Why? Greece is running out of cash.

GBP-USD has given up its February gains on the coalescing market expectation that the Fed will raise the interest rates before the Bank of England (BOE) this year as UK inflation remains too far away from the BOE target level.  There are no major economic reports or news scheduled for today.

USD-CAD has climbed to a near 10-year high and may set new highs if Friday’s February Employment Report fails to keep up with the recent US employment data.  The market is expecting 5K new jobs and the unemployment rate to remain at 6.6 percent.

AUD-USD has dropped to an 11-year low overnight.  Thursday’s release of February employment data puts the currency pair at risk of going lower.  The economy lost over 12,000 jobs in January.

Have a great Monday!