USD Rises on Surprise Jump in Retail Sales

15th August

The greenback was up against most major currencies in overnight trading as an unexpected rise in core retail sales. The U.S. Commerce Department reported that retail sales figured jumped 0.8% in July after a 0.7% decline in June, by far beating market expectations for a 0.3% increase. This was the first increase in four months. Lower fuel prices and moderate growth in employment helped towards a 0.8% monthly increase in retail and food services sales.

The numbers reported by the U.S. Commerce Department sparked hopes the Federal Reserve will probably stall on widely anticipated plans to stimulate the fragile US economy – the world’s largest economy – with monetary easing tools, weakening the greenback to stimulate growth.

Whilst markets applauded the retail figures, the economic recovery in the US remains delicate. Its economy increased at an annualized rate of 1.5% in the second 3 months of this year, slower than the 2% rate recorded at the start of the year. The total number of unemployed people stood at 12.8 million for last month and is about 8.3% of its working age population. The US economy has to generate 100,000 new jobs each and every month just to remain stagnant, according to figures from the Federal Reserve.

Gains in the USD were tempered a little by lower profit forecasts by a host of global companies but still the USD posted a 0.05% increase against the JPY, a 0.02% increase against the GBP and a 0.10% increase against the AUD.

Yesterday stocks in Europe increased on the news that the economy of the 17 member state eurozone contracted 0.2% in the 3 months from April to June compared with the zero growth in the previous quarter. Europe’s largest economy, Germany increased by 0.3% in the second quarter, aided by increases in exports and domestic consumption. France’s economy recorded zero growth in the period, beating expectations, but Portugal’s GDP contracted 1.2%, Cyprus posted a 0.8% contraction and Italy shrank 0.7%.

Today

After a volatile days trading yesterday, today much of the focus will be on first the UK, with key unemployment figures released. This is followed by the focus switching to the US where key CPI figures, industrial production and manufacturing index figures are all released. This should be a busy day for the GBP/USD, currently 1.5674, with supports seen at 1.5675/57 and then at 1.5578, whilst resistance levels are at 1.5730/66 and then at 1.5768.