On June 18th, data released by the U.S. Commerce Department showed retail sales increased by 0.9% month-over-month in May, significantly surpassing the expected 0.5% gain. Economists noted that substantial government tax rebates in April and May provided a boost to consumption, but this cash buffer is starting to diminish. Gas station sales rose 3.4% month-over-month in May, up from 2.4% in April, and surged 26.5% year-over-year. Excluding gas station sales, retail sales grew 0.7% in May, indicating broad-based consumer spending growth. Sales at clothing, accessory, and furniture stores all increased, while online sales rose 1.5%. Of course, some areas showed weakness, with sales at electronics, appliance stores, and department stores experiencing slight declines. The data released Wednesday only reflects a segment of consumer spending and does not cover service expenditures such as travel and hotel lodging. In the sole service category included, restaurant spending fell by 0.1%. Consumers are the engine of the U.S. economy, driving most of the nation's growth. The latest retail figures further indicate that spending has remained resilient this year despite rising prices. Economists stated that robust job market growth has also supported consumption.
In other news, a recent survey shows that a vast majority of economists focused on the Bank of Japan expect it to raise interest rates again by the end of this year, following its decision this week to lift the benchmark rate to its highest level since 1995. In the survey conducted Wednesday, 90% of 44 economists forecast that the BOJ will further increase the benchmark rate from the current 1% before its December meeting. 25% of respondents expect the next hike in December, while another 36% believe it will occur in October. In a separate question about the earliest possible timing for the next rate increase, nearly one-quarter of respondents selected September. Marcel Thieliant, Head of Asia-Pacific at Capital Economics, stated in the survey response: "With the BOJ now judging that downside risks to economic activity have receded and upside risks to inflation have increased, we expect policymakers to accelerate the tightening cycle in the future. We currently expect the BOJ to hike again in October and then conduct three additional hikes by 2027."
Data to watch today includes the UK April unemployment rate, the UK April three-month average earnings including bonuses, the U.S. initial jobless claims for the week ending June 13th, and the U.S. June Philadelphia Fed Manufacturing Index. Additionally, the Bank of England will release its interest rate decision and meeting minutes in the evening, which require close attention.
Gold/US Dollar
Gold declined significantly yesterday, hitting a fresh three-day low, with the spot rate currently trading around $2,317. Besides profit-taking exerting some downward pressure on gold, the Federal Reserve's decision to hold rates steady as expected but its hawkish signals, which boosted expectations for future rate hikes, were key factors weighing on the precious metal. However, easing tensions in the Middle East limited the extent of gold's pullback. Focus today is on resistance near the $2,340 level, with support around $2,250.
U.S. Dollar/Japanese Yen
The U.S. dollar against the Japanese yen moved higher in a choppy session yesterday, reaching a fresh 23-month high, with the current exchange rate trading around 160.60. The U.S. dollar index's rise, supported by the Fed's hawkish stance despite holding rates and positive economic data, was the main driver behind the pair's climb. However, concerns about potential renewed intervention by Japan in the currency market and investor expectations for further BOJ rate hikes capped the pair's upside. Focus today is on resistance near 161.50, with support around 159.50.
U.S. Dollar/Canadian Dollar
The U.S. dollar against the Canadian dollar surged significantly yesterday, breaking through the 1.4100 level to hit a fresh seven-month high, with the current exchange rate trading around 1.4110. The U.S. dollar index's advance, fueled by strong economic data and hawkish Fed signals that boosted rate hike expectations, was the primary reason supporting the pair's rise. Additionally, persistently falling crude oil prices also provided some support for the pair. Focus today is on resistance near 1.4200, with support around 1.4000.
Comments