Not a good day for the Euro and the Pound yesterday as both currencies suffered losses against the US Dollar. The European currency was hit by lower than expected PMI levels for the Euro-zone.

Germany’s indices were in line with the expectations but it is obvious that the strongest economy in the Euro-area can’t carry Europe higher on its own. The Euro fell below the 1.3700 barrier on the back of the disappointing releases but managed to gain back some lost ground to close the day around 1.3720.

The Pound was also lower for the day but in a mild fashion trading down to 1.6630. Today’s Retail Sales report has the potential to reverse the recent downtrend in the currency and send the Pound higher again. In fact there is a number of reasons to support a strong Retail Sales reading today: consumer demand rose recently at the highest pace in 2.5 years, retail sales grew last month and also the average weekly earnings improved. All that factors can contribute to a stronger Retail Sales report.

The FTSE 100 continued to be on the rise and the UK index is now challenging the yearly highs at 6,865. A strong Retail Sales report will help the FTSE to reach its recent highs and possibly post a new high for 2014.

This week has been a little light on important economic news and developments and that allowed for trading conditions to remain calm and volatility subdued. This however is bound to change next week as we have several significant reports scheduled for release: Euro-zone’s inflation, US Consumer Confidence levels and the UK GBP are just some of the most notable ones.

UK Retail Sales and US House data on the docket

The Economic Calendar today is kind of light on important events. Early in the morning the British Retail Sales are scheduled for release and as we discussed above there’s room for a surprise higher for this release. Any positive reading for the sales index will support the recent FTSE 100 rally and also has the potential to reverse the Pound’s current downtrend.

Later in the day, the US Existing Home Sales report will be the last piece of important data for this week. Expectations make word of a weak reading in the housing index and that could be in line with the recent disappointing reports from the housing index. However, we expect the Dollar’s reaction to this report to be limited.

Economic Calendar

TECHNICAL ANALYSIS & LEVELS

EUR/USD

GBP/USD

FTSE 100

Gold

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