Week in FX Americas – US Retail Sales Tackles USD Rally

One of the expected drivers of a US Economic recovery are consumers. In a week that will live down in history based on the size of the correction the US retail sales came in at –0.3% not a disaster in itself, but under the expected –0.1%. Consumers are still cautious about their spending. It will be interesting to see how low gasoline prices and even the introduction of the iPhone 6 plays into next month’s figures.

The EUD/USD reversed the trend after the retail sales figures as it could mean a longer period of record low rates as it seemed the US economy could be losing steam. Global stock markets rebounded slightly after a dreadful week. There are signs of risk appetite creeping back into the market. The uncertainty created by negative economic data out of the US compounded with global growth forecast cuts earlier in the month drove the market into a tailspin. Aggravating factors such as the ebola health crisis, armed conflicts, political protests kept investors busy deciding their next steps. European markets show signs of life and the USD has rebounded as volatility subsides.

US jobless claims came in at a 14 year low with 264,000 filed for unemployment insurance last week. Industrial production in the US also outperformed expectations with a 1.0% gain in September. Both indicators calmed the nerves of the market that the US economic recovery was losing steam. The USD continues to rise versus major pairs but some analysts have begun pushing out the rate hike well into 2015 and some have even suggested it could start in 2016 given the global and domestic environments. Fed member speeches are divided clearly into the hawk and dove camps with the strength of the USD caught in the middle.

Next Week For Americas:

The drop in US retail sales along other geopolitical events trigged a wave of uncertainty across the globe. Stock markets and emerging market currencies were the biggest losers as the US economy was thought to be slowing down. The last two days of the week calmed investor’s nerves as earning reports were solid as well as housing and employment indicators out of the US.

Next week has two major trends: Central banks and PMIs. The Reserve Bank of Australia releases its minutes on Tuesday. The Bank of England will also release the minutes from its rate setting meeting two weeks ago on Wednesday . Given that the BOE’s chief economist has cooled expectations of a rate hike this year there will be little surprise in the minutes. The Bank of Canada will announce its benchmark rate. No change is expected given the mixed economic data and employment data confusion.

The flash manufacturing purchasing manager’s index PMI is a survey of manager to gauge their optimism regarding business conditions going forward. HSBC for China and Markit for the rest of the world are the firms that have compiled the early draft of the data and will release it starting with China and the schedule will move around the world given insights into the state of the global economy.

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