Sharp Rise In U.S. Retail Sales Buoys Dollar

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The U.S. dollar spiked higher against its major counterparts in the European session on Wednesday, as the nation’s retail sales rebounded sharply in January amid the additional government stimulus, signaling an economic recovery from the crisis.

Data from the Commerce Department showed that U.S. retail sales rebounded much more than anticipated in the month of January.

The Commerce Department said retail sales spiked by 5.3 percent in January after sliding by a revised 1.0 percent in December.

Economists had expected retail sales to jump by 1.1 percent compared to the 0.7 percent decrease originally reported for the previous month.

Excluding sales by motor vehicle and parts retailers, retail sales soared by 5.9 percent in January after tumbling by a revised 1.8 percent in December.

Economists had expected ex-auto sales to increase by 1.0 percent compared to the 1.4 percent slump originally reported for the previous month.

Data from the Labor Department showed that U.S. producer prices jumped much more than expected in the month of January.

The Labor Department said its producer price index for final demand surged up by 1.3 percent in January after rising by 0.3 percent in December. Economists had expected producer prices to increase by 0.4 percent.

The Fed minutes, due at 2:00 pm ET, is expected to reaffirm the central bank’s commitment to maintain an accommodative monetary policy to attain employment goal.

In an interview with CNBC, St. Louis Fed President James Bullard said on Tuesday that the dollar’s position as the world’s reserve currency was safe.

U.S. inflation was in excellent condition right now, but it would likely move up this year.

Market prices were not showing signs of a bubble, even though he noted stocks were “highly valued.”

The dollar rose in the Asian session, driven by a surge in U.S. Treasury yields amid concerns about a possible rise in inflation.

The USD/CHF pair gained 0.7 percent, approaching an 8-day high of 0.8979. At yesterday’s trading close, the pair was quoted at 0.8920. Immediate resistance for the dollar is likely seen around the 0.92 level.

The greenback added 0.6 percent to hit a 9-day high of 1.2030 against the euro. The pair was worth 1.2106 when it closed deals on Tuesday. The greenback may face resistance around the 1.18 region, if it gains again.

Data from Eurostat showed that Eurozone’s construction output dropped for the first time in three months in December.

The construction output decreased 3.7 percent month-on-month in December, after a 2.3 percent growth in November.

The greenback rose back to 106.21 against the yen, a pip short of more than a 5-month peak of 106.22 seen in the Asian session. The pair had closed Tuesday’s deals at 106.04. Further rally in the currency may challenge resistance around the 108.00 region.

Data from the Ministry of Finance showed that Japan posted a merchandise trade deficit of 323.9 billion yen in January.

That beat forecasts for a shortfall of 600 billion yen following the 751 billion yen surplus in December.

The greenback was up by 0.4 percent against the pound, at a 5-day high of 1.3841. The pound-greenback pair had ended yesterday’s trading session at 1.3902. Next near term resistance for the greenback is found around the 1.34 level.

Data from the Office for National Statistics showed that UK consumer price inflation rose marginally in January.

Consumer price inflation rose slightly to 0.7 percent from 0.6 percent in December. The rate was forecast to remain stable at 0.6 percent.

After falling to 1.2682 at 5:00 pm ET, the greenback turned higher against the loonie, touching a 5-day high of 1.2737. The greenback was trading at 1.2684 a loonie at yesterday’s close. Should the currency rallies again, 1.29 is possibly seen as its next resistance level.

The greenback approached a 5-day high of 0.7725 against the aussie, climbing from a low of 0.7772 seen at 3:45 am ET. The greenback was worth 0.7754 per aussie at Tuesday’s New York session close. The greenback may test resistance near the 0.75 level.

The latest survey from Westpac Bank and the Melbourne Institute showed that the Australian economy is gradually starting to pick up steam in January, with a leading index forecast of 4.48 percent – up from 4.24 percent in December.

The growth rate of the Index continues to point to above trend growth in the Australian economy through 2021.

The greenback reached as high as 0.7158 against the kiwi, setting nearly a 2-week high. At Tuesday’s close, the pair was valued at 0.7210. Extension of the greenback’s upward trading is likely to lead it to a resistance around the 0.70 level.

The Fed minutes from the January 26-27 meeting are set for release at 2:00 pm ET.

The material has been provided by InstaForex Company – www.instaforex.com

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