FX Markets Brace for Key Data: Can Retail Sales Revive the USD?.

  • US retail sales data is crucial—any weakness could hit equities, interest rates, and the dollar.
  • Washington’s reset agenda is keeping risk sentiment fragile, with upcoming tariffs in focus.
  • The Fed is unlikely to change policy but could provide slight support for the USD.
  • The euro could gain short-term strength if the ECB signals a pause in April rate cuts.
  • The BoE faces sticky wage growth, limiting its ability to turn dovish, though UK fiscal tightening may weigh on GBP.

USD: February Retail Sales in Focus

Concerns over a cooling US consumer have weighed on interest rates and equities, with spending habits playing a crucial role in economic momentum since the pandemic. February’s retail sales data, expected to show a 0.6% rebound after January’s 0.9% decline, will be a key test. Any downside surprise could push equities lower, weaken the dollar, and put further pressure on interest rates.

Investors are also watching Washington’s approach to its economic reset. The administration appears willing to accept slower growth—or even a mild recession—to reshape trade and security policies. With fresh tariffs on Europe and Asia expected next month, market sentiment is likely to stay fragile.

Elsewhere, this week’s FOMC meeting should bring little change to policy, but the Fed’s projections could provide slight upside support for the USD. With Chair Powell maintaining a steady hand, markets are currently pricing in more rate cuts than the Fed anticipates. Meanwhile, global geopolitics remain in play as President Trump and President Putin prepare for talks, with potential FX implications.

US equity futures are down 0.6%, despite modest gains in Asia following China’s stimulus package. Unless retail sales surprise to the upside, the dollar remains vulnerable, with DXY likely leaning toward 103.20/30 rather than 104.00/10.

EUR: Will the ECB Hit Pause in April?

EUR/USD remains supported in the short term, as weaker US equities keep the dollar on the back foot. European markets are focused on fiscal stimulus, defense spending, and the ECB’s potential pause in rate cuts at its April 17 meeting. Factors that could boost the euro include:

  • Progress in Trump-Putin Ukraine ceasefire talks
  • German lawmakers approving stimulus measures
  • ECB President Lagarde signaling a rate pause in her speech on Thursday

EUR/USD could push towards 1.0930/50, but pressure may mount in April as Washington enforces reciprocal trade tariffs. A 1.05-1.10 trading range is expected for Q2.

GBP: Can the BoE Escape the Wage Trap?

Thursday is a crucial day for UK markets, with wage data and a Bank of England policy decision. Wage growth is expected to stay above 6%, leaving little room for a dovish shift. The BoE is likely to hold rates with a 6-3 vote in favor of no change.

Markets currently price in 53bps of rate cuts this year, while our view sees 75bps. A potential trigger for a more dovish shift could come from next week’s Spring Statement by UK Chancellor Rachel Reeves, where spending cuts and tighter fiscal policies may put pressure on sterling.

With the dollar weak, any GBP losses may be felt more against the euro or yen, as investors adopt a defensive stance ahead of April’s US tariffs. GBP/JPY, currently near 193, could slip toward 187 in the coming weeks.

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.