Retail sales figures, released on a monthly basis by the Census Bureau in the US, have always been an important driver of US dollar and other currency strength and weakness. They are up there along with such indicators as the employment rate and GDP growth.
For the past two months, US retail sales have been out of step with the employment figures, in particular. While the employment rate is slowly but surely approaching what the authorities define as full employment, that percentage of the working population that is in a job coupled with wage levels that start to engender a rise in inflation, this has not been reflected in the purchasing activity of people in the shopping malls. If they have more money, they are saving it rather that spending it. As can be seen above, while the year-on-year change is heading in the right direction, both December and January were in negative territory.
The recent severe weather might be a factor. For all these reasons the outcome for February, which will be released later today, will be closely watched.
Will retail sales check the dollar surge?
As parity between the US dollar and the Euro appears on the radar, Forex traders everywhere are wondering when and if there will be a correction in the steep downward trend of the Euro / dollar pair. Technically, there are a number of lesser support levels to be breached before the really significant nice round number of one is reached. However, each break through support is resulting in a short squeeze, brought on by the hitting of stop losses below said supports. Good retail sales figures today will undoubtedly accelerate this tendency, while the opposite outcome just might bring about some (temporary?) respite.