Dollar hits May lows after retail sales miss

The US Dollar Index fell to a five-month low of 101.50 on Wednesday after retail sales and PPI data came in below expectations. However, traders quickly reversed course after hearing comments from Federal Reserve official James Bullard, who was considered to be hawkish on interest rates. As a result, the index ended the day back in positive territory.

Key Factors for Today

● Dollar hits a 5-month low then bounces
● Stocks dip in Europe
● Pound rises after UK CPI
● Oil stockpiles continue to rise

Coming Up

● Lagarde and Schnabel Speeches
● Philly Fed Manufacturing Index
● Fed Collins, Brainard and Williams Speeches
● WTI Oil EIA weekly report

DXY drops after soft data then rebounds

The 10-year US yield fell to a new low of 5.25%, with the dollar index sliding to lows of 101.50, not seen since last May. The move lower started before retail sales and PPI data were released but accelerated as lower producer prices supported the disinflation narrative. The index recovered all intraday losses to close mixed after Fed’s Bullard said he wanted the Fed to err on the tighter side of the 5.25-5.50% rate projection for the end of the year.

Stocks dip in Europe

European markets were down on Thursday in line with global market trends as investors try to discern the future of the economy. The World Economic Forum taking place in Davos this week has had discussions on this topic high on its agenda.

European shares fell after Wall Street saw a sharp drop in the Dow Jones Industrial Average on Wednesday. The fall came as investors cashed in on some of the stock markets strong January gains, and as a disappointing retail sales report from the United States stoked fears of an impending recession.

Pound rises after UK CPI

On Wednesday, the British Pound spiked nearly 1% after the release of the latest CPI figures which showed that core yearly CPI had risen by 0.1%. Although the monthly and annual headline figures were both in line with what was expected, this was enough to encourage traders that the BOE would have to hike rates by 50 bps in its next monetary policy meeting.

API Reports Another Big Stockpile

The APIs private survey said that US crude inventories grew by 7.6 million barrels, with gasoline inventories also growing by 2.8 million barrels. Oil prices were further impacted following the release of US retail sales data, which was below market expectations, marking a short-lived bias above the $80 per barrel mark before closing at 2.45% lower on Wednesday. $82.40 and $76.30 per barrel remain in the spotlight.