Dollar Forex Market Weakness Continues Ahead of Key Data

• Euro and Pound Both Gain on USD
• December Retail Sales in Focus
• Turbulence on Wall Street Continues

The US Dollar forex market has continued to show weakness for the third consecutive day as the Dollar Index dipped lower still. This has been to the benefit of both the Euro and Pound with the two currencies building on strength earlier in the week to move higher. This comes ahead of another important day on the economic calendar with the release of December retail sales. Meanwhile, on Wall Street, stocks are trying to bounce back from another challenging day of selling to end the week on a more positive note. 

Sterling and Euro Both Profit From Dollar Weakness

Euro forex trading was again in positive territory during the Thursday and early Friday trading sessions. The pair closed the previous day close to 1.145 and those bullish on the pair expect it could challenge 1.15 to end the week. ECB President Christine Lagarde is also due to speak though the common currency has mainly capitalized on Dollar weakness rather than any of its own positivity. 

It has been a similar case for Sterling as the GBP/USD moved above the 1.37 mark. There was some more good news from the British side though as November GDP figures showed a 0.9% monthly increase. This was substantially better than the 0.4% analysts had expected and may give further strength to the Pound. 

Traders Eye Retail Sales Figures

Forex brokers and traders alike in the US are keenly awaiting the release of retail sales data for the month of December. Though figures are largely expected to remain unchanged, any divergence will have an impact on the Dollar. An upside beat could give some support to the Dollar as it looks to break a three-day losing run.  

Further focus will also be on the Fed and in particular, Treasury yield rates. The 10-year yield in the US fell almost 2% on Thursday pressurizing the Dollar. A recovery here would see the Dollar push back against its rivals with the March expectation for an interest rate hike at very high levels above 80%. 

Bank Earnings in Focus on Wall Street

The important numbers for the day on Wall Street will come not only from US retail sales but also from the major bank earnings as they report before the opening bell. This will kick off a busy day of numbers and traders will hope to reclaim some of the losses of Thursday to enter the weekend on a more positive footing. 

All the major indices sold off to close lower yesterday. The Dow Jones was the least of the casualties with a drop of just under 0.5%. The S&P 500 dipped 1.4% falling back sharply toward the end of the day, and the tech-heavy NASDAQ took a beating with a more than 2.5% loss on the day. Equities traders will be hoping for a better end to the week.