• 638 days Will The ECB Continue To Hike Rates?
  • 638 days Forbes: Aramco Remains Largest Company In The Middle East
  • 640 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 1,040 days Could Crypto Overtake Traditional Investment?
  • 1,045 days Americans Still Quitting Jobs At Record Pace
  • 1,047 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 1,050 days Is The Dollar Too Strong?
  • 1,050 days Big Tech Disappoints Investors on Earnings Calls
  • 1,051 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 1,053 days China Is Quietly Trying To Distance Itself From Russia
  • 1,053 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 1,057 days Crypto Investors Won Big In 2021
  • 1,057 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 1,058 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 1,060 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 1,061 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 1,064 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 1,065 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 1,065 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 1,067 days Are NFTs About To Take Over Gaming?
Billionaires Are Pushing Art To New Limits

Billionaires Are Pushing Art To New Limits

Welcome to Art Basel: The…

Another Retail Giant Bites The Dust

Another Retail Giant Bites The Dust

Forever 21 filed for Chapter…

Strong U.S. Dollar Weighs On Blue Chip Earnings

Strong U.S. Dollar Weighs On Blue Chip Earnings

Earnings season is well underway,…

  1. Home
  2. Markets
  3. Other

Blame it on the Weather?

Retail sales grew by less than expected at 0.1% in February after a flat showing in January, while sales ex-autos fell 0.1% from 0.2% in January. This weak report coupled with the downward revision in the January core sales should further drag on US Q1 GDP . We're not sure about the validity of claims by some economists attributing the weakness to cold weather, when February is a month known for its cold temperatures. The decline in sales was broad-based, even when excluding autos, gasoline and building materials.

The weakness in retail sales comprises an economic argument to trigger further unwinding in the yen carry trade, in which point it will extend to other dollar pairs. Unlike the carry trade unwinding of two weeks ago, which was largely market-based and only limited to low yielding currencies, today's report triggers an all round sell-off in the US dollar, lifting EURUSD above 1.3220 and GBPUSD above 1.9340.

The chart below shows year-on-year retail sales excluding autos against the Fed Funds rate. The annual increase slowed to 3.07% in February, the lowest pace since April 2003. The year-on-year rate rids of the periodic fluctuations of the month-to-month rate and suggests that a Fed easing could occur as early as May. We see a 70% chance for May cut and expect 50 bps aggregate easing in 2007.

The chart below shows USDJPY seeking further declines towards the 116.44 support, followed by the 116.20 trend line support. The usual rebound is seen limited to 117.00, while 117.30 remains solid interim resistance, which traders are unwilling to test ahead of further US data releases this week.

EURUSD finally breaches above the 1.32 figure, but the vital test for further strength stands at the multiple trend line resistance levels of 1.3250 and 1.3275, which could be realized by end of week ahead of array of manufacturing figures. This week's industrial production figures should prove crucial in avoiding 1.3275 EURUSD depending on whether we see another monthly decline.

 

Back to homepage

Leave a comment

Leave a comment