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Strong US retail data helps boost USD

USD - United States Dollar

Demand for the US dollar climbed this morning after US retail sales posted a stronger than expected result yesterday. Retails sales jumped 1.7% last month after rising by only 0.8% in September, and this was its largest gain since March this year. It was the third straight monthly advance and even beat economists’ forecasts of a 1.4% increase.

This gave the US dollar further momentum, which has been spurred on by last week's US inflation data showing that inflation was at a multi-year high. Speculation that the Federal Reserve's tapering of their bond buying program may not quite be enough to stem inflation, and that an interest rate hike may be the only solution, has provided fuel to the US dollar. The US Dollar Index was sitting around 96.00 at the time of writing.

Key Movers

The euro has remained weak, breaking below the 1.13 handle against the US dollar overnight. The Eurozone economy is starting to show signs of cracking, and appears to be underperforming some of the leading global economies too. Coupled with this, the European Central Bank doesn’t appear to want to discuss tightening their monetary policy and are a step or two behind the Bank of England and US Federal Reserve. EURUSD was down 0.12% sitting around 1.3073 at the time of writing.

Demand for the pound rose to a one-week high against the US dollar after data showed that inflation in the UK climbed to a 10-year high in October, supporting market expectations of a probable interest rate hike as early as next month. Plus, the pound was also buoyed by the strength of the UK labor market, with data beating market expectations and exhibited a strong rebound in activity despite the completion of government support. GBPUSD was up 0.27% around 1.3463 at the time of writing.

The Canadian dollar edged lower against its US counterpart after data showed inflation was in line with market expectations. Canadian inflation climbed to the highest in two decades, with the consumer price index (CPI) rising to 4.7% in October from the previous year vs. 4.4% in September. The October number is the highest since February 2003. USDCAD was up 0.28% trading at around 1.25940 at the time of writing.

Expected Ranges

EUR/USD: 1.1276 - 1.1343 ▼

GBP/USD: 1.3404 - 1.349 ▲

AUD/USD: 0.7265 - 0.7314 ▼

USD/CAD: 1.2544 - 1.2598 ▲