Dollar Flat, Equities Lower Ahead of Retail Sales
AUGUST 14, 2020
The U.S. dollar opens today in familiar ranges versus most of its G-10 counterparts even as global risk sentiment has taken a dive.
Hopes for a virus stimulus deal have been dashed in the short-term as the Senate broke for recess until after Labor Day. On the bright side, President Trump backtracked on threats to veto a bill that contains funding for the Postal Service. A lack of a deal is having a negative effect on the risk mood this morning, and a more protracted stalemate threatens the strong recovery we have seen in equity markets over the past few months.
At 8:30 a.m., July’s retail sales data is expected to show the previous recovery in consumer spending slowed. After crumbling in March and April, retail sales soared 18.2% in May and then a modest 7.5% increase in June. Today’s print is expected to show a 2.1% expansion with the prospects for a lower number in August after the extra unemployment benefits expired. Consumer spending accounts for close to 70% of the American economy.
What to Watch Today…
- Retail Sales at 8:30 a.m.
Complete Economic Calendar can be found here.
The Euro remained fairly steady versus most of its rivals overnight. Indeed, EUR/USD held a 0.2% range. European stocks, however, were not as lucky. Indexes fell over 1% after the United Kingdom expanded their list of targeted quarantine counties. Travelers from France, Netherlands, and Malta will now have to quarantine for 14 days upon entering the U.K. Travel and leisure stocks were the worst hit.
Germany reported the newest cases since May and Spain and the Netherlands reported deteriorating conditions, putting added pressure on the common currency.
The New Zealand dollar continues its recent march lower against the U.S. dollar. NZD is now down for four consecutive days after the virus spread beyond Auckland, the countries largest city. New Zealand had gone over 100 days without community spread but now appears struggling to get the virus back under control.
However, most of the Kiwi’s weakness can be attributed to the Reserve Bank of New Zealand who indicated that they may seek to slow gains in the currency. The New Zealand dollar has rallied 18% from its low in March. However, the Kiwi still remains the worst performing G10 currency this calendar year, down 2.58% against the U.S. dollar.