The USD showed some strong bullish signals after the ISM services and employment figures for January, with the idea that the FED will keep raising rates, as inflation is slowing down as well. Yesterday we did see some hawkish comments after the CPI inflation report for January showed another slowdown in the USD on the annualized numbers to 6.4% for the headline CPI and 5.7% for core CPI YoY.

Although the slowdown was minimal and the monthly numbers came out positive. Among others, FED’s Bowman made some hawkish comments, which sent the FED terminal rate to 5.03%. AUD/USD made a bearish reversal early this month as the USD jumped higher, but it has been stuck between two moving averages on the h4 chart for more than a week. So, if there is a strong number today, chances are that we will see a break to the downside.

Comments from FED’s Bowman

• Not seeing as much moderation in inflation as we would like
• We still see a very strong labor market
• and not as much moderation in inflation as we would like
• Soft landing is unusual to accomplish
• There is a lot of data between now and the next FOMC meeting
• We expect to continue raising rates

This is an interesting and hawkish line that’s one to watch. Although, markets are not convinced yet, and they are awaiting more data from the US. Today we have the retail sales report for last month, which is expected to show a reversal after declining in December. But, the report might be stronger than expected, which should push the USD further into a bullish trend.

December’s Retail Sales Chart

The attention for this week was mainly on the CPI report but retail sales are more likely to offer a better view of the state of the consumer, which is what will determine what happens next with the economy in the coming months. 14 of the last 16 times December retail sales were weak, but on the other hand, January was stronger than expected. Besides that, there was some great weather in January and upbeat spending surveys, so the odds of a strong report are high.

Expectations are for a strong increase by+1.9% MoM in January, after the -1.1% that we saw in December. The control group is also seen at +0.8%, up from -0.7% last month. Core sales are expected at 1.1% on the other hand, coming from a 0.9% decline previously. Bank of America has some good credit card data and their economists are at +3.0% on the headline and +2.6%(!) on the control group.

AUD/USD Live Chart