FX Times: Greenback Strengthens on Retail Sales Data

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Via fxtimes.com
Fundamental Updates \ Nick Nasad \ 9:54 AM EST \ December 11th, 2009

US retail sales rose 1.3% in November following a 1.1% rise in October that was revised lower. The rise in the headline figure was more than twice the forecast amount and shows that consumers were buying aggressively, a positive sign for the economy. The increase was broad based, as sales excluding auto’s was up 1.2%, also surprising forecasts and the biggest gain since January. US consumers continued to buy cars as sales of autos and parts rose 1.6%. Filling stations sales climbed 6%, elevated by rising prices. Taking sales of gasoline and cars out of the equations sales were up 0.6%, as shoppers spent 0.3% at health stores, 0.5% in restaurants and bars, 1.5% on building materials, 2.8% on electronics, and 1% on food and beverages. Categories that saw weaker sales including furniture retailers and clothing stores.

The positive data boosted the greenback as its a sign that the US economy is recovering, and consumer spending, which makes up 70% of the economy is rebounding heading into the holiday shopping season. The data in addition with the better-than-expected November non-farm payroll report is the type of data being watched by policy makers at the Fed. Investors are pricing in that the Fed, seeing such improvement, will move to increase interest rates sooner than expected. The theme for most of this year has been that positive data, from the US or abroad, helped to boost risk appetite which favored the higher yielders and not the Dollar. However, the non-farm payroll report has changed that dynamic as now improved data from the US labor market and in consumer spending increase the likelihood that the Fed will have to begin tightening its loose monetary stance.