US Retail Sales Announcement Shows US Strength

Alan Penny

14 February 2020

3 min read

dollar sign on a magnifying glass

  • Retail Sales came out on Friday
  • Both initial and core figures met expectations
  • US dollar continues to be the strongest currency

The United States released Retail Sales figures to kick off the Friday session, ahead of Consumer Sentiment figures later in the day. The retail sales figures are crucial when it comes to the US economy because 70% of GDP is based on consumption.

With that in mind, it’s crucial to watch this figure. It has a significant amount of influence on the US dollar and, of course, US stocks when it surprises. This time, the number came out as expected, so it’s very likely that most of the market could dispense with watching.

Retail Sales baked into prices

The Retail Sales figures come out in two different versions, the initial one being the headline Retail Sales number coming out month-over-month, which is all retail sales combined. The other version is the Core Retail Sales month-over-month, which excludes automobile sales. This is an extraordinarily volatile figure, so it is anticipated that Core Retail Sales is a better measure.

retail sales are steady but not necessarily stellar

Looking at the announcements, the Retail Sales month-over-month figures came out at 0.3%, exactly as expected. However, the previous figure was revised downward from 0.3% to the 0.2% reading, which shows a lagging weakness.

The Core Retail Sales figure came out at 0.3% as anticipated. The previous month was revised downward from 0.7% to the 0.6% figure. This suggests that, although the United States continues to lead the world as far as GDP is concerned, retail sales are steady but not necessarily stellar.

This should continue to bring into focus the underlying strength of the United States versus many of its contemporaries, so that puts extra buying pressure for the US dollar. Furthermore, and probably more likely, the stock markets will continue to attract a lot of attention as well.

The US dollar has been strengthening quite rapidly against most other currencies, with the euro being a notable example.

The US dollar performance

US Dollar Index chart

The clear winner in the forex markets will be the US dollar. When looking at the US Dollar Index, it’s easy to see that it has been in an uptrend for quite some time, as the US Dollar Index shows the strength of the currency against a basket of major currencies. It currently sits at 99, well on its way to 100 given enough time. Short-term pullbacks in the US dollar suggest the currency should continue to show signs of strength.

Ultimately, the market has been grinding to the upside when it comes to the index. Therefore, it’s also worth noticing that the up-trending channel is well intact, and value is found in pullbacks.

Ultimately, if the US Dollar Index can break above the 100 level, it should send other major currencies into a tailspin. The market for the US dollar is currently the strongest it has been in months and shows no signs of slowing down.

Written By
Alan Penny

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