Summary:
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Retail sales and core reading both top estimates
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Prior readings revised lower though
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USD at its highest level in over a year
The biggest piece of economic data from the US this afternoon has come in better than expected, with consumer spending figures topping forecasts. Some of the positivity from the release has been taken away however, with downward revisions to the previous prints boosting the latest reading in relative terms.
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USD was already higher ahead of the release, and the buck remains close to its highest level of the day post-data. Only the TRY and JPY are making any noteworthy gains against the buck, which is higher against the vast majority of its peers. Source: xStation
Looking more closely at the data itself, the retail sales M/M for July rose to 0.5% compared to an expected 0.1%. The prior reading now stands at 0.2% after being revised down from 0.5%. Taking out gas and autos sales the figures were even more pleasing, showing a M/M gain of 0.6% - well above the 0.3% expected. Again though, this was boosted by a downwards revision to the prior data which now stands at 0.2% from 0.4% beforehand.
A big contributor to the rise was clothing stores, which increased by 1.3% with food services and drinking establishments climbing at the same pace. Overall the data could be described as mildly positive, but given the prior revisions it has not provided much of a market reaction.
The US dollar has extended its gains today, with the market moving up to its highest level since June 2017. The market made a decisive break above prior resistance around 95.10 last week and has built on those gains in recent sessions. Source: xStation
One thing to possible keep an eye on for the rest of the session is the so called Fed’s System Open Market Account (SOMA) - one of the tools the central bank uses to conduct its open market operations. There is expected to be $12.6B rolled off the Fed’s balance sheet today and Nordea bank have noted a fairly strong correlation between days when SOMA occurs and a rise in the greenback. Their note on the matter reads as follows:
Source: Nordea Bank
