We at FOREXYARD, encourage our customers to get involved in the most intense market events. As such, we think you should know that the U.S. Retail Sales report is expected tomorrow, March 12th, at 12:30 (GMT), and you need to be prepared. Market events like this one tend to create either big changes to current trends or push current trends even further. Generally, the Majors are the ones most affected by market events in general, but Crude Oil, Gold prices, and even the price of Silver can change dramatically in the seconds after such a publication. For more information about the U.S. Retail Sales, please read below.

What is the U.S. Retail Sales Report?

U.S. Retail Sales is a leading economic indicator used to measure the percentage change in the total value of sales at the retail level during the previous month. It is a leading indicator of economic health because the report reflects a wide variety of consumer spending, such as restaurants, consumer goods, and automobiles. Consumer sentiment can also be derived from this survey in order to gauge the outlook on the U.S. economy. This report is the earliest indicator of consumer spending released by the U.S. Census Bureau. An additional report released at the same time is the Core Retail Sales report, which does not include sales of automobiles. When used together, the reports paint a picture of the state of the U.S. consumer. This survey predominantly helps to analyze market trends and to determine the direction of the U.S. economy.

If the Survey Comes Inline with Market Forecasts

Expectations for this month are suggesting that the U.S. Retail Sales will fall by 0.5% in February. The U.S. economy is currently facing both an economic crisis and a financial crisis, triggered by a downturn in the housing market, a lack of credit, and the reluctance of banks to lend. Consumers may have delayed large purchases on account of the deteriorating economy and a lack of credit could adversely affect this report. The sale of new autos accounts for roughly 20% of the report’s total and are largely financed by bank loans. The recent drop in equity markets may also add to a negative outlook for the American consumer which could reduce their spending on non-essential items. A decreasing figure will most likely be interpreted by investors that the American people are scaling back their purchases in a time of financial uncertainty. Such a scenario will probably move the greenback down and the EUR/USD might rise to test the 1.2900 level.

If the Survey Will Surprise With Bullishness

When the actual figure is higher than forecasted, traders are likely to see the USD appreciate against its currency pairs and crosses. The volatile two trading weeks we have just experienced concluded with significant strength for the USD. Investors are now following the opportunity to make profits out of their open positions on the USD, and a better-than-expected figure on the Retail Sales survey, such as 0% or higher, will possibly provide them that exact opportunity. Such a figure is good because it will ease some concerns regarding a contracting U.S economy. If U.S. citizens are increasing their purchases, this may reduce pressure in a tough market and push the USD higher. With a decrease in gas prices that are down 47% from their highs, consumers may see an increase in disposable income, reflecting in additional purchases. In this turn of events, the EUR/USD might correct itself down to reach as low as the 1.2500 level.

Click here to visit Forex Yard and open a SuperMini, Pro or Demo Account.

We at FOREXYARD, encourage our customers to get involved in the most intense market events. As such, we think you should know that the British Official Bank Rate and Euro-Zone Minimum Bid Rate figures are expected tomorrow, March 5th, at 12:00 and 12:45 GMT, respectively, and you need to be prepared. Market events like these tend to create either big changes to current trends or push current trends even further. Generally, the Majors are the ones most affected by market events in general but Crude Oil, Gold prices, and even the price of Silver can change dramatically in the seconds after such a publication. For more information about these Euro-Zone interest rates read the information below.

What are the European Interest Rate Figures?

Expected to be released tomorrow are the target interest rates of the Bank of England (BoE) and European Central Bank (ECB). These are called the Official Bank Rate and Minimum Bid Rate, respectively.

These figures are each released monthly, usually during the first week of the month. They are important because short-term interest rates are the leading factor in determining the value of a currency. In fact, most other economic indicators are used by traders to speculate about the future movement of these interest rates.

The British Official Bank Rate is decided on by the Monetary Policy Committee (MPC) of the BoE. The Euro-Zone Minimum Bid Rate is decided on by the 6 members of the ECB as well as the central bank governors from each of the 16 nations in the European Monetary Union. According to the needs of each respective economy, the banks will elect to increase, decrease, or leave the rate unchanged. Traders pay close attention to these figures as they have a strong correlation with the value of the GBP and EUR.

If Interest Rates are Changed In-Line with Market Expectations

Economic analysts are forecasting that Britain will lower its Official Bank Rate by 50 basis points from 1.00% to 0.50%. The Euro-Zone is also expected to cut its Minimum Bid Rate by 50 basis points from 2.00% to 1.50%.

If interest rates are indeed reduced by both central banks, traders may expect depreciation in the value of the GBP and EUR. A cut to interest rates devalues a currency as it increases the amount of that currency available in the market. However, in these times of financial crisis and global economic slow-down, an interest rate cut in an exceedingly weakened European economy is seen as an action which is intended to boost consumer confidence and increase spending, which may in fact help strengthen the currencies of the region after initially weakening them through monetary easing.

In this situation, traders may see the GBP gaining strength to test the 1.4300 level against the USD, while the EUR may regain lost ground and trade near the 1.2600 level.

If Central Banks will Surprise the Market with the Opposite

As of now, analysts are predicting a rate cut throughout the Euro-Zone, including Britain. If, however, these rate cuts are not as deep, or if they are not taken at all, the likely result will be a continuation of the current trends for the European currencies. This may indicate that the central banks of the Euro-Zone, as well as the Bank of England (BoE), are either afraid of, or uncertain about the effects of the expected rate cuts. This will indicate a deep fear in the economy and prevent many investors and consumers from regaining confidence in the market.

With this result, the GBP will continue on its downward path and likely test the 1.3800 price level versus the USD. Likewise, the EUR will continue depreciating against the Dollar with the price level of 1.2200 potentially being reached by beginning of the following week.

Click here to visit Forex Yard and open a SuperMini, Pro or Demo Account.