US retail sales fell to a 10-month low. However, the US Dollar Index rose as the market remains optimistic that the Fed will continue monetary tightening as expected.
The US Commerce Department reported that US Retail Sales in December fell from 0.2% to -1.9% in November. The gain was far below expectations of 0.1%.
Core Retail Sales, which did not take into account sales of automotive goods, also fell from 0.1% to -2.3%. According to economists' observations, the decline in US Retail Sales occurred because people had been spending heavily in October, in order to avoid stock shortages that often occur in December. January retail sales are also expected to be just as bad due to the spread of infection of the Omicron variant in the US.
"The (Retail Sales) weakness in December was likely due more to the timing of public spending..." said Scott Hoyt, senior economist at Moody's Analytics, "Support has come from stronger employment and income growth towards pre-pandemic standards, as well as an abundance of cash. cash and credit availability for consumers."
USD has reached its lowest point, prepares to consolidate
US Retail Sales data and a series of US economic data this week are somewhat negative. This had dimmed investors' confidence in the Fed's hawkish rhetoric, even though Chairman Jerome Powell emphasized the continuation of monetary tightening in his testimony yesterday.
Some fear the Fed will back away from plans; others are still optimistic that monetary policymakers will continue to implement the Quantitative Tightening discourse as expected. Now, those who believe in the continuation of the Fed's hawkish sentiment are starting to dominate.
Having collapsed after the release of US CPI data, the US Dollar Index is now starting to bounce up from a 3-day low as the selling has started to subside. As of this writing on Friday (14/January) evening, the Index was up 0.42% to 95.25.
The position of the US Dollar that was installed by the Dollar Hedge Funds until early January was near the highest level since early 2020. In the last few days, the selling pressure was observed to be increasing. However, the analysts at Scotiabank expect that the US Dollar has already hit a psychological low. Furthermore, the US Dollar is bracing for a consolidative mode until the Fed decides on monetary policy again.
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