5 Reasons For Big FX Moves On Friday

• USD Sells Off as Jobless Claims Spike
• GBP Soars as Traders Eye 1.40, Retail Sales & PMI on Friday
• EURGBP Falls to Lowest Level Since March 2020
• AUD Supported by Stronger Labor Data
• EUR Rises Ahead of PMIs
• CAD Unfazed by Lower Oil and Prospect of Weaker Spending

10 and one 10 us dollar bill

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The post retail sales rally in the U.S. dollar did not last as the greenback resumed its slide against all major currencies on Thursday. This decline was somewhat surprising given the sell-off in U.S. stocks and rise in 10 year Treasury yields which typically coincides with a stronger dollar. However, the pullback was supported by economic data. While the Philadelphia Fed manufacturing index beat expectations, activity slowed from the previous month. Jobless claims also jumped from 793K to 861K last week. Building permits rose 10% but this improvement was offset by a drop in housing starts. Ultimately none of these reports are high-impact data for the dollar but they reinforced the lack of demand for the greenback. Sterling benefitted the most from U.S. dollar weakness with GBP/USD traders driving the pair towards 1.40. With no UK data to spark these gains, the move was purely technical.

Friday will be a busy one for forex traders with many market-moving economic reports scheduled for release. However the focus will be on other currencies and not the dollar because the only US release, existing home sales typically does not inspire big moves so instead, the dollar will take its cue from stocks and yields.

Keep an eye on sterling because the question of whether GBP/USD breaks or fails at 1.40 will be determined by Friday’s UK retail sales and PMI reports. We know from the British retail consortium’s own measure that consumer spending was very weak at the start of the year as they reported the slowest rise since May. Economists are also looking for a significant decline. Ongoing restrictions should to weaker PMIs even as we look forward to a strong second-half recovery. All of this suggests that the path of least resistance for GBP/USD in the near term should be lower.

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