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US dollar Rebounds on Retail Sales

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US dollar Rebounds on Retail Sales

The US dollar rose against a basket of its major competitors after retail sales outpaced expectations in November.

Rebounding job prospects, higher wages and rising household wealth have eased retailers’ concerns over a slow holiday season. Retail sales advanced at a monthly pace of 0.7 percent. Compared to year-ago levels, retail revenues increased 4.7 percent. Auto dealers, furniture stores and online retailers led the gains, as bargain-hunters took advantage of Black Friday and Cyber Monday.

The US dollar index advanced almost 0.4 percent to 80.20, shrugging off an unexpected spike in weekly jobless claims. In total, 368,000 Americans applied for unemployment benefits last week, 68,000 more than the prior week. Seasonal volatility connected to the holiday season was the biggest factor behind the unexpected jump. The unemployment rate fell to a five-year low in November, according to official Labor Department estimates.

“I wouldn’t put too much stock in the ups and downs of initial jobless claims over the next several weeks because seasonal volatility is pretty high this time of year,” said Ryan Sweet of Moody’s Analytics.

The dollar was back in the driver’s seat against the other safe havens, soaring nearly 0.6 percent against the Japanese yen to retake 103. In Europe, the British pound struggled to uphold last week’s gains, falling 40 pips to 1.6337 US. Europe’s common currency declined 38 pips to 1.3748 US after euro area industrial output fell at the sharpest rate since September 2012.

The commodity currencies were no match for the greenback. Stronger than forecasted employment growth in Australia wasn’t enough to lift the Aussie, which fell 111 pips to 0.8929 US, a three-month low. North of the US border the Canadian dollar snapped its three-day winning streak ahead of testimony from Bank of Canada Governor Stephen Poloz. The US dollar advanced 50 pips to 1.0639 CAD.

Market participants are keeping a watchful eye on next week’s FOMC policy meetings. Around one-third of economists polled by Bloomberg believe the Fed could begin paring asset purchases at the next meetings.

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