US DATA: Regional Feds Eye Further Disinflation Progress In Breadth, Stickiness

• RES 4: 0.8797 High Dec 17   
• RES 3: 0.8746 High Jan 21 and a key resistance  
• RES 2: 0.8741 High Feb 09
• RES 1: 0.8729 100-dma
• PRICE: 0.8706 @ 16:27 GMT Feb 9
• SUP 1: 0.8676/8613 20-day EMA / Low Feb 04 and bear trigger
• SUP 2: 0.8597 Low Aug 14
• SUP 3: 0.8578 Low Jul 2 ‘25 
• SUP 4: 0.8544 50.0% retracement of the Dec ‘24 - Nov ‘25 bull cycle

Thursday’s strong bounce in EURGBP, and the continuation Monday, still appears corrective. Key short-term resistance to monitor is 0.8746, the Jan 21 high, where a break would signal a potential trend reversal. Moving average studies are in a bear-mode position and this highlights a dominant downtrend. A resumption of weakness would open 0.8597, the Aug 14 low. The bear trigger is at 0.8613, the Feb 4 low.

A range of analyst forecasts for the December advance retail sales report, from most to least positive:

• Deutsche: "We expect anecdotes of solid holiday spending to be reflected in [the] data. Headline sales should increase by 0.4% (vs. +0.6%), while ex autos (+0.3% vs. +0.5%) and retail control (+0.3% vs. +0.4%) should post similar gains. On our forecast, Q4 retail control will have grown 4.5% annualized, the seventh quarter in a row at 4% or higher, which bodes well for personal consumption in the Q4 GDP report on February 20th."
• Wells Fargo (headline 0.4%, ex-auto 0.3%): "The November data point to firm underlying consumer momentum in Q4, with broad-based strength spanning across multiple categories. That said, high-frequency spending data suggest a slow pace of spending in December. This isn't too surprising to us, as we've anticipated a weak end to the year and factored that into our holiday sales forecast. A cooling labor market has many households concerned about steady income prospects, while persistent price pressure has driven affordability challenges that are pressuring discretionary purchases. As a result, we look for retail sales to grow at a cooler pace of 0.4% over the month. That said, while December has the potential to be soft, more favorable household tax policy should provide some reprieve to households this year and offer a tailwind to spending."
• NatWest (+0.3% for both headline and ex-autos/gas): "We assume retail sales stayed positive, albeit less than in November. Still, our forecast would likely be consistent with real PCE spending in Q4 on track for an annualized growth pace of slightly less than 3% relative to Q3."
• BofA (0.3% and 0.2% in the ex-autos and control group components, respectively): "We have modestly upgraded our December retail sales forecasts based on the November data, which were released on January 14. However, we still expect a slightly below-consensus report. Underlying spending was solid in December, but the Census' projected seasonal factors are unfavorable."
• TD: "We expect retail sales declined 0.2% m/m in December due to volatile gas and autos. The control group was likely also subdued at 0.1%."

Focal Data reports, “the geopolitical centre of gravity is already shifting away from the United States and towards China, driven mainly by Europe’s increased distance from the US under the Trump presidencies.”

• The report notes, “Our analysis suggests that the United States is unlikely to be able to bring Europe onside in its pursuit of a bipolar axis. We have conducted public opinion studies in the United States, the United Kingdom and France, the latter of which reveal the collapse in favourability for the US and desire for greater European integration.”
• Separately, YouGov reports, “Not only is the US now seen more negatively, but Europeans are increasingly of the belief that it is no longer a friendly nation, with the number seeing America as either a friend and ally, or at least a friendly rival, having fallen significantly since we last asked in 2023."
• YouGov continues, “Nowhere is this more clear than in Denmark, with only 26% of Danes seeing the US as an ally or friendly nation, compared to fully 80% in July 2023. Fewer than half in Spain (39%), Germany (41%) and Britain (46%) continue to see America as friendly or an ally, with slightly more than half saying the same in Italy (52%) and France (53%).”

Figure 1: US-China Index Based on Correlation of UN Votes Between Countries

 Source: Focal Data