The Retail Sales Report for the United States is scheduled to be released soon. This report is predicted to indicate that retail sales have picked up over the last month by almost 1 percent. The big question that Forex traders have regarding this announcement is how it will affect the U.S. dollar. Even though many products have increased in price, consumer demand has still gone up. Experts have predicted that although inflation has generally occurred over the last several months, consumer interest has been rising more steadily thanks to improvements in the labor pool.
If domestic retail sales have increased, shouldn’t this make the dollar stronger? The truth is that the USD has been increasing in price in relation to the Euro. Whether or not declining economies in Europe have been the culprit for this is unclear, but there is no indication that the dollar will be hurt by this announcement. Instead, the dollar should rise in price even more in relation to Europe’s currency.
Japan’s currency, the yen, has been dropping in value in comparison to the USD as well. This could be a result of backlash over declining European economies, but more likely, it is due to the earthquake and tsunami that have hit Japan. As these events have happened in close proximity to each other, it is impossible to distinguish their effect on price fluctuations.
The moral of this story is that the USD is in a great place for it to increase in value even more. Shorting the Euro or the yen in favor of the dollar is a good idea in this instance.