US Dollar Index Sinks Following Weaker Retail Sales

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US Dollar Index Sinks Following Weaker Retail Sales

US Dollar Index weakened on Friday following lower than expected Retail Sales figures for the month of August. Binary options traders might have been profiting along the way down, since the price moved lower by 80 pips. There had also been new rising tensions, triggered by a new missile launch over Japan by North Korea, which raised again concerns that the situation might escalate again further.

August Retail Sales MoM down to -0.2%

Even though the market expectations were around 0.1%, the actual figures turned out to be much worse, at -0.2%. Also, the July numbers had been revised lower, from 0.6% to 0.3%, adding extra pressure on the US dollar index quote.

Looking at out chart above, you can see that the Retail Sales are in a downtrend since the start of the year, as each low had been followed by a swing high and then a lower low. This suggests a weakening in the underlying numbers and also that the numbers could continue to underperform in the upcoming months.

Binary options activity might be intense around 91.80 and 92.26 resistance levels, since they represent strong selling areas where sellers might react pretty strongly. If the price will continue to weaken further, it might head towards 90.84 support, where the recent upward leg started to build up.

So far, there are no positive news that could support the upside and we expect the downside to extend lower as long as pressure will continue to mount. We also have the Fed meeting this week and investors might look for new hints regarding a new rate hike until the end of the year and also, a guide regarding the reduction of the Fed balance sheet.

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Stocks tumble after weak retail sales fan slowdown fears

  • Stocks slumped Thursday following an unexpected and sharp fall in December retail sales.
  • The drop pointed to weakening consumer spending and raised concerns about a slowdown.
  • Watch the major averages trade in real time here.

Wall Street fell Thursday after a measure of consumer spending unexpectedly suffered a steep decline at the end of 2020 despite the holiday season, renewing expectations for slowing growth in the largest economy.

The Dow Jones Industrial Average fell more than 100 points, or 0.5%. The S&P 500 and the Nasdaq Composite declined 0.4% and 0.1%, respectively. Futures had pointed to higher opens for the major US averages.

Retail sales sank 1.2% in December, the Commerce Department said early Thursday, the biggest drop since 2009 and well below economist expectations for a 0.1% increase. Receipts fell in nearly every major category, raising concerns about an economy fueled by consumer spending.

“The decline in gasoline spending was not a surprise, but the rest of the weakness in retail sales was worse than expected,” said Adam Ozimek, an economist at Moody’s. “We are likely seeing some combination of wealth effects from falling stock prices and a the effects of a bad winter.”

A majority of sectors on the S&P 500 were lower following the report, on track to break a four-day string of gains. The index’s retail group fell 0.8%.

Not helping the mood, Coca-Cola posted stronger-than-expected earnings but dimmed its outlook for 2020. Shares of the beverage company fell 7% after reporting expectations for sales to slow this year.

Investors flocked to the relative safety of government bonds, pushing yields lower. The dollar edged higher against a basket of peers.

On the commodities front, oil prices fell 0.9%. Brent was trading around $63.55, and West Texas Intermediate at around $53.48.

The trade war between Washington and Beijing will come into focus Friday, when President Xi Jinping is expected to meet with Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer. Markets had reacted positively this week following reports that President Donald Trump may be open to extending a trade truce deadline of March 2.

“In the months ahead we’ll see if [December’s retail sales data] was an outlier or a trend,” said Chris Larkin, senior vice president of retail trading at E-trade. “For now, the main market mover is trade, and it’s a smart bet that we’ll see the market move based on how the US-China negotiations play out.”

Currencies

Anneken Tappe

British pound catches bid as May heads to Strasbourg on Brexit business

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The U.S. dollar on Monday slipped into negative territory, following a highly anticipated retail sales report that drew little reaction from the greenback. Instead, traders focused on a buoyant British pound, which rallied as traders awaited a key Brexit vote.

U.S. retail sales rose by 0.2% in January, while the December reading of negative 1.2% was revised to negative 1.6%. January figures excluding cars and excluding cars and gas, rose 0.9% and 1.2%, respectively.

In December, the same retail sales report undercut expectations and registered its worst drop in nine years, spooking investors worrying about the health of the U.S. economy, though subsequent retail data weren’t as weak as the headline number suggested.

Business inventories for December, meanwhile, grew 0.6%.

The ICE U.S. Dollar Index DXY, +0.26% was last down 0.1% at 97.202. Last week, the popular gauge, which measures the greenback against six rivals, climbed 0.8%.

Late Sunday, Federal Reserve Chairman President Jerome Powell said on CBS News program “60 Minutes” that the U.S. economy was overall in a good place and that interest rates were fine where they are, reiterating his previous wait-and-see stance on further rate increases.

The British pound GBPUSD, +0.21% was the best G-10 performer of the day, as traders are gearing up for yet another Brexit-filled week. The pound last bought $1.3140, compared with $1.3014 late Friday.

The presumably final vote on U.K. Prime Minister Theresa May’s Brexit deal is due to take place in the British Parliament on Tuesday, amid some reports that the U.K.

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According to FX strategists at Nomura, “we will likely witness 1) a second meaningful vote, 2) a parliament likely to vote against a no-deal Brexit, and a vote on 3) an Article 50 extension.” Article 50 is the portion of the Treaty of the European Union dealing with withdrawal from the bloc.

The U.K. is scheduled to leave the European Union in 18 days, on March 29, and so far, no deal governing London’s future relationship with the European continent is in place.

Elsewhere in Europe, the euro EURUSD, -0.82% bought $1.1246, up 0.2% from Friday. The eurozone’s biggest economy, Germany, reported stronger-than-expected trade numbers for January, but its industrials production for the same month came in below forecasts.

On the note of trade, the People’s Bank of China Gov. Yi Gang affirmed on Sunday that China would avoid manipulating its currency to boost exports, and said the issue was discussed during the U.S.-China trade negotiations. Last month, the U.S. demanded that China’s yuan be stabilized as part of a trade deal. Yi said in his comments that “our exchange rates is relatively stable. But at the same time, that stability does not mean the exchange rate is fixed.”

The yuan slightly weaker versus the dollar on Monday, with the buck buying 6.7264 yuan USDCNY, -0.07% in Beijing, up 0.1%, and 6.7318 yuan USDCNH, -0.05% in the offshore market, little changed from Friday.

Fed, seeking ways to improve Treasury market, eases capital rule for big banks

The Federal Reserve, seeking more ways to help stabilize the fragile Treasury market, eased a rule so that big banks can be more active in the market.

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