Here Come the Bulls – U.S Retail Sales

Dollar weakness persisted through the early part of the day, the Dollar Spot Index falling back into the red on the European open, down 0.03% at the time of the report, while having recovered from yesterday’s sub 101 level lows.

There’s certainly been plenty to influence the markets in the second half of the week and it’s not just been Trump, the ECB monetary policy meeting minutes reflecting some dissent within the ranks over the asset purchase program, with the acknowledged pickup in inflation providing support for the EUR, currently up 0.19% against the Dollar.

If there is dissent within the governing council, recent FOMC member commentary will also raise questions over how quickly the FED will be moving on rates through the year, members Harker, Lockhart and Bullard speaking through the U.S Session, outlooks on rate hikes ranging from Bullard’s single hike to Harker’s three, the dovish commentary coming despite the U.S economy moving from strength to strength through the second half of the year.

The combined effects of dovish commentary from FOMC members and Trump’s lack of detail on a fiscal stimulus package has left the Dollar on the back foot, a lack of material economic data through the week adding to the negative sentiment with the AUD currently up 0.09% at $0.74906, the gains coming despite weak trade data out of China this morning and a fall in commodity prices, the Bloomberg Commodity Index currently down 0.22% weighed by the trade figures released during the Asian session.

While the Dollar has been on the defensive, we expect there to be a turnaround through the European and U.S sessions, key macroeconomic data out of the U.S this afternoon including December retail sales figures, which are forecasted to see a jump in the final month of the year, consumer confidence and a tight labour market, not to mention a marked improvement in wage growth, driving consumption through to the end of the year.

The Dollar needs a boost and today’s stats are likely to provide the much needed tonic to allow the markets to shake off the negativity that has been pegging back the Dollar and the Dow.

The dovish commentary from FOMC members certainly need to be considered, but should we see confidence and retail sales continue to impress, even the more dovish members are likely to find it hard to push back a first half of the year move, though as we are now all too aware, global economic growth could be at the mercy of the president elect and any punitive trade tariffs, China’s economic growth relevant not just to the Asian economies but also to the U.S economy and financial market stability.

Are we to expect Trump to unveil a fiscal policy stimulus package in the coming weeks? It would be quite a shift if the president-elect changes course on the promise of rebuilding America, the ongoing noise over Russia’s possible involvement in the U.S election quite likely to have overshadowed key issues that needed to be addressed.

For now however, it’s over to the retail sales figures and the upside for the Dollar will certainly provide some relief for the Dollar bulls, who had run for the hills on Wednesday and have yet to find reason to return to the fray.