Yesterday we previewed the US retail sales report and said that it would have a important impact on risk sentiment for the New York trading session as we end this week.
A better-than-expected reading was expect did to boost investor sentiment and therefore higher yielders at the expense of safe haven currencies, while a weaker report could bring back the specter of slowing US economy and therefore way on riskier assets and currencies.
Well, the figures are in and retail sales rose 1.1% for the month of September getting expectations of a 0.8% increase. Excluding autos - the core retail sales number - was also up better-than-expected at 0.6%. We also saw some nice upward revisions to August reading including a headline upward revision from 0.0% to 0.3%.
Much of the increase was due to a 3.6% jump for autos and parts sales. But even so spending on restaurants, furniture, clothing, department stores, and non-store retail sales all posted gains.
Impact on Market of Release
Overall this is a strong set of figures and should help economists pencil in slightly stronger growth for the fourth quarter. the US consumer has had the myriad of factors lining up against him/her. Early in the year it was higher food and energy prices which pressured purchasing power. Early on in the summer the debt ceiling crisis along with stock market losses undermined confidence. And in August we saw that incomes fell for the first time in nearly 2 years. Therefore can the fourth quarter show some respite for US consumers, and if so that would be a positive for growth expectations not only for the US but for the global economy.
In currency markets are commodity currencies responded most favorably to the retail sales news with the Australian, New Zealand, and Canadian dollars breaking above their intraday highs following the release.
The euro meanwhile had a hard time moving above its highs from overnight, and from earlier this week, despite the risk-on report, and is indicative that the market may already be generally EUR long, and any extra buying is being met by selling pressure at the 1.3820 area.