17/08/2020

Mixed US Retail Sales data release moves the dollar lower


USD

The dollar moved lower on Friday following a mixed US Retail Sales data release which caused investors to sell the dollar. Concerns remain over the speed of the US economic recovery and the country’s inability to manage the coronavirus pandemic as cases surge past the five million mark.

The latest figures released by the US Census Bureau on Friday showed consumers spending less than expected in July as the world’s biggest economy continues its struggle to shake off the negative effects of the coronavirus.

Retail Sales for July undershot expectations of 1.9% to read 1.2%. On the face of it, this is a pretty poor reading, however there was some hope for optimism as the Retail Sales Excluding autos figure gained, beating expectations of 1.2% to read 1.9%.

In addition to the mixed retail sales report, it’s likely that the ongoing dispute between the Democrats and Republicans regarding further stimulus is contributing to a weaker dollar. As of Friday, hopes of an imminent breakthrough were dented as both the Senate and House of Representatives headed for their August recess with no fresh talks scheduled with President Trump’s negotiators. The lack of progress leaves millions of Americans in financial uncertainty as a $600 per week federal unemployment benefit, protection from evictions and the window to apply for the Paycheck Protection Programme for small businesses have expired. Federal Reserve Chair Jerome Powell has warned that failure to agree on additional stimulus will jeopardise the US economic recovery.

Finally, the dollar was further pressured as markets re-opened for the week yesterday, as investors who took safe-haven positions ahead of Saturday’s US-China Phase 1 review, unwound some of these positions on the news the review had been postponed.

EUR

The euro fell early during Friday’s session as data showed the Eurozone suffered a record fall in employment in the second quarter.

According to the data released by Eurostat, the number of people in employment fell by 2.8% which was a greater fall than market forecasts of 1.7%. There are concerns amongst investors that the unemployment rate in the Eurozone will continue to rise during the second half of the year as it’s unclear as to whether governments of member states will extend their current job retention schemes. If not, we will undoubtedly see a significant rise in Eurozone unemployment which will weigh in its economic recovery.

Key announcements

14.00 – US – Michigan consumer sentiment index. Expected to drop slightly to 72 from 72.5 previous


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