On January 15th, data released overnight by the US Department of Commerce revealed that retail sales, not adjusted for inflation, increased by 0.6% month-on-month in November, surpassing the expected 0.5%. The October figure was revised down from the initial reading to -0.1%. Year-on-year, sales grew by 3.3%. Excluding the volatile automotive category, core retail sales still achieved a 0.5% monthly increase. Retail sales excluding autos rose 0.5% month-on-month, exceeding market forecasts. The "retail control group," a key input for GDP calculations, increased by 0.4% monthly, matching expectations. Year-on-year, total retail sales grew by 5.1%, indicating that despite ongoing structural divergence in a "K-shaped economy" affecting market sentiment, overall consumption data remain robust, supporting expectations for strong GDP growth in the fourth quarter. Even when roughly deflated using the Consumer Price Index, real retail sales maintained positive year-on-year growth.
Furthermore, the Beige Book released by the Federal Reserve on Wednesday indicated that economic activity increased slightly in most parts of the United States recently, while employment conditions remained generally stable. However, inflationary pressures have not fully subsided, providing a practical basis for the Fed to keep interest rates unchanged in the near term and continue monitoring data. The report showed that eight of the twelve Federal Reserve Districts reported slight to modest growth in economic activity, while eight districts indicated that hiring was largely unchanged. With the exception of two districts noting only "slight" price increases, prices rose at a "modest" pace in the remaining areas. Overall, the current report showed slight improvement compared to the previous edition. "Outlooks for future economic activity remained generally positive, with contacts expecting little or no growth over the next six months."
Economic data to be watched today include the UK November GDP MoM, UK November Industrial Output MoM, UK November Goods Trade Balance, US January Philadelphia Fed Manufacturing Index, US November Import Price Index MoM, US Initial Jobless Claims for the week ending January 10th, and Canada's November Manufacturing Sales MoM.
The US Dollar Index trended lower yesterday, closing slightly down for the day, with the spot price currently trading around 99.10. Profit-taking exerted some downward pressure on the pair, while concerns over the Federal Reserve's independence also weighed on the index. However, the broadly positive US economic data released during the session, which reinforced expectations that the Fed will hold rates steady in January, limited the extent of the decline. Focus today is on resistance near 99.50, with support located around 98.50.
The EUR/USD pair traded within a narrow range yesterday, closing marginally higher for the day, with the spot price currently trading around 1.1640. Short-covering provided some support, but the primary factor behind the euro's rebound was the weakening US dollar, which was pressured by profit-taking and concerns over Fed independence. Additionally, expectations that the European Central Bank is nearing the end of its rate-cutting cycle also lent some support to the pair. Focus today is on resistance near 1.1750, with support located around 1.1550.
The GBP/USD pair moved higher yesterday, closing with modest gains for the day, with the spot price currently trading around 1.3430. Short-covering contributed to the support, but the main driver of the pound's recovery was a softer US dollar, pressured by profit-taking and doubts about the Fed's independence. Nevertheless, the robust US economic data, which solidified expectations for a Fed pause in January, capped the pair's upside potential. Focus today is on resistance near 1.3500, with support located around 1.3350.
Comments