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Disappointing U.S. Retail Sales Not Likely to Alter Plans for December Rate Hike

By:
James Hyerczyk
Updated: Nov 13, 2015, 15:14 UTC

U.S. retail sales disappointed again with a showing of 0.1 percent, below trader estimates of a 0.3 percent rise. Retail sales excluding automobiles,

Disappointing U.S. Retail Sales Not Likely to Alter Plans for December Rate Hike

FEDERAL RESERVE
U.S. retail sales disappointed again with a showing of 0.1 percent, below trader estimates of a 0.3 percent rise. Retail sales excluding automobiles, gasoline, building materials and food services rose 0.2 percent after an upwardly revised 0.1 percent gain in September. Traders were looking for a 0.4% reading.

There was a little hint of inflation according to the U.S. Producer Price Index data. The PPI for October fell 0.4 percent, recovering slightly from -0.5 percent in September. The report, however, missed the 0.2% estimate.

Later today at 10:00 a.m. ET, data on consumer sentiment and business inventories will be released. Preliminary University of Michigan Sentiment is expected to come out at 91.3. Business Inventories are estimated to show a 0.1% rise.

Trader reaction to the report suggests it did not have a major impact of the probability of a rate hike by the Fed in December.

The EUR/USD weakened on the retail sales news, but the Forex pair is still in a position to mount a slightly higher close for the week.

The week started out with the EUR/USD under a bearish cloud because last Friday’s stronger-than-expected U.S. Non-Farm Payrolls report raised the probability of an early Fed rate hike to 70%. This news drove the Euro lower. However, the Euro began to pick up strength about mid-week on speculation that the European Central Bank’s fresh stimulus will not be as large as previous estimated. Additionally, the weaker stock market helped boost the funding element of the Euro.

The GBP/USD moved higher after the release of the U.S. retail sales report and is in a position to close higher for the week. This week, the Forex pair reached a low at 1.5026 but rebounded the rest of the week on the heels of better-than-expected U.K. labor data.

January Crude oil futures are set to finish the week sharply lower. Concerns over the supply glut continue to press prices lower. Oversupply is currently estimated at between 0.7-2.5 million barrels per day being produced over demand.

Also pressuring markets today was a report from the International Energy Agency. According to its Monthly Oil Market Report, there is a record 3 billion barrels in tanks worldwide and that ballooning global stockpiles of crude oil and oil products could worsen the supply glut into next year.

December Comex Gold futures are set to finish near a six-year low. The market traded steady today, but is likely to finish lower for a fourth straight week. Hawkish comments from Fed officials this week helped raise the probability of a December rate hike, driving investors out of gold. 

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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