Dollar Reverses Losses After Solid Retail Sales

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Dollar Reverses Losses After Solid Retail Sales

OCTOBER 15, 2021

The U.S. dollar remained on the defensive overnight after trading on its backfoot all of yesterday. 

Overview

Risk sentiment has been buoyed by better-than-expected earnings results from many U.S. corporates.  Financial stocks in particular have led the recent rally.  Futures are again pointing to a higher open.

The dollar finding some support in early trading, however, after retail sales beat expectations.  Overall sales rose 0.7%, topping estimates of a 0.2% decline.  A breakdown of the report showed that sales beat estimates in every metric, an impressive result.

A separate report showed that the New York Fed Empire Index fell to 19.8, missing estimates of 25.0. The University of Michigan sentiment is due out at 10 a.m., but it is likely that traders will remain focused on retail sales and earnings season. Inflation fears continue to be a cloud threatening the “risk-on” party.  Brent Crude and WTI are higher, again. And a gauge of six industrial metals hit a record high at the London Metal Exchange.

What to Watch Today…

  • University Of Michigan sentiment at 10 a.m.

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EUR  

The Euro bounced higher on widespread U.S. dollar weakness and reached levels not seen in almost two weeks.  The Euro modest rebound comes despite continued dovishness from the European Central Bank, especially compared to its American and British counterparts.  ECB President Christine Lagarde said in a statement that it is “crucial” to not withdraw support too early.  The ECB’s Pandemic Emergency Purchase Programme (PEPP) is set to expire at the end of Q1 2022.

EUR/USD remains near its weakest level in over a year.

CAD  

The Canadian dollar continued its positive momentum against the U.S. dollar.  The loonie gained over half a percent versus the greenback, touching its strongest level in three months.  The price of WTI oil advanced over a percent to break $81 a barrel.

The Canadian economic docket showed manufacturing sales rose 0.5% month over month in August, beating estimates of a 0.3% gain.   The positive data has only been slightly beneficial to the loonie’s strength.

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