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US Dollar Rebounds on Business Inventories, Retail Sales

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US Dollar Rebounds on Business Inventories, Retail Sales

The US dollar rebounded on Tuesday, as stronger than forecasted Q4 data boosted confidence in economic recovery.

The greenback rose nearly 0.2 percent to 80.66 against a basket of its major competitors, erasing the previous day’s losses. Business inventories rose at a 0.4 percent clip in November, compared to 0.3 percent the prior month. A median estimate of economists polled by Thomson Reuters called for 0.3 percent.

Business inventories among manufacturers, retailers and wholesalers are a key component of gross domestic product. The sentiment on Wall Street is that higher than forecasted inventories will boost fourth quarter GDP.

Retail sales, which are also factored into GDP, rose 0.2 percent in December, compared to estimates calling for 0.1 percent. Retail revenues excluding automobiles rose 0.7 percent, the biggest gain since February 2013. In total, seven of the 13 major retail categories reported gains, led by food and beverage stores, which rose at the fastest rate since October 2006.

The dollar gained more than 100 pips against the Japanese yen after shedding the same in the previous session. The USDJPY pair bounced back from four-week lows, hitting 104.16 in the North American session.

The gradual easing of UK inflation didn’t hurt the British pound, which regained its footing to rise 56 pips against the US dollar. The GBPUSD pair reached a daily high of 1.6463, but consolidated at 1.6444. The euro rose 15 pips to 1.3681 US after Eurozone industrial production soared to three-and-a-half year highs.

The US dollar maintained its bullish drive against its northern counterpart, the Canadian dollar, setting fresh four-year highs. The USDCAD pair advanced another 73 pips to 1.0941. The North American pair has gained more than 1 percent this week and more than 2.2 percent since January 1.

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