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U.S. Dollar Jumps after Commerce Department Reports Better Retail Sales

By:
James Hyerczyk

The U.S. Dollar rose on Friday, pressuring the Euro, British Pound and gold, after the U.S. Commerce Department reported better-than-expected retail

U.S. Dollar Jumps after Commerce Department Reports Better Retail Sales

US DOLLAR
The U.S. Dollar rose on Friday, pressuring the Euro, British Pound and gold, after the U.S. Commerce Department reported better-than-expected retail sales. According to the report, retail sales excluding automobiles, gasoline, building materials and food services increased 0.6 percent last month after an unrevised 0.3 percent decline in December. Economists were looking for a 0.3 percent increase last month.

Overall retail sales rose 0.2 percent in January as cheaper gasoline undercut receipts at service stations and harsh winter weather weighed on spending at restaurants and bars. Retail sales increased by an upwardly revised 0.2 percent in December, up from the previously reported 0.1 percent gain.

Also on Friday, the U.S. Labor Department reported that import prices dropped 1.1 percent last month after a revised 1.1 percent decrease in December. Import prices fell for a seventh straight month and 17 of the last 19 months, reflecting a robust dollar and plunging oil prices.

Economists were looking for import prices to come in at -1.4 percent after a previously reported 1.2 percent fall in December.

Import prices were down 6.2 percent from January 2015. This took place while the U.S. Dollar was posting a 21 percent gain and crude oil prices were hovering near 12-year lows.

Preliminary University of Michigan Consumer Sentiment came in below expectations at 90.7 versus an estimate of 92.6. This number reflected lower expectations for the economy and additional Fed rate hikes. Stock market volatility was also a factor driving the number lower.

In other news, New York Federal Reserve President William Dudley said monetary policy remains “quite accommodative” after the central bank’s decision to hike rates in December. Monetary policy has only “limited” ability to respond to volatility, he added.

Dudley also said that key components of the United States economy remain healthy, and it is better equipped to withstand shocks than before the financial crisis.

In news affecting the GBP/USD, British construction spending output fell more than expected in the fourth quarter, dragged down by reduced infrastructure spending despite house building increasing at the fastest pace since the start of 2014.

According to the Office for National Statistics, construction output fell 0.4 percent in the fourth quarter after a 1.7 percent decline in the third quarter. Construction output rose 1.5 percent in December alone, in line with economists’ forecasts after a 1.1 percent drop in November. For 2015 as a whole, construction output grew by 3.4 percent.

Officials said today that the Euro Zone economy grew by 0.3 percent in the last three months of 2015, meeting expectations. Data from Eurostat showed that, year on year, the gross domestic product (GDP) for the 19 countries that use the Euro grew at a respectable 1.5 percent in the fourth quarter.

Greece and Finland reported contractions, but German GDP rose 0.3 percent from the previous quarter. Year-on-year, its economy expanded 1.3 percent, according to Germany’s statistics office Destatis.

April WTI Crude Oil rose more than 7 percent on Friday on renewed hopes for a coordinated production cut sparked by comments from the energy minister of OPEC member United Arab Emirates.

UAE Energy Minister Suhail bin Mohammed al-Mazrouei said that OPEC was willing to talk with other exporters about cutting output. He added that cheap oil was already forcing some output reductions which would help rebalance the market.

 

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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