Dollar soars as retail sales confirm strong US economy
Updated at 10:00 EDT
Written by Karen Brettel
NEW YORK (Reuters) – The dollar weakened on Thursday after data showed U.S. retail sales rose slightly more than expected in September, boosting confidence that the U.S. economy remains strong. It rose to an 11-week high.
As expected, the move came after the exchange rate reaction to the European Central Bank’s decision to cut interest rates by 25 basis points was relatively muted.
U.S. retail sales rose 0.4% last month, after rising an unrevised 0.1% in August. Economists polled by Reuters had expected retail sales to rise 0.3%.
“It’s marginal, but it confirms that the U.S. economy remains relatively resilient,” said Brad Bechtel, global head of foreign exchange at Jefferies in New York.
Bechtel said the dollar strengthened because traders were pricing in a less dovish Federal Reserve, while at the same time “coordinating in the direction of the ECB, the Bank of England, etc.”
The dollar index =USD recently rose 0.16% to 103.70, rising to 103.87, its highest since August 2nd.
The euro EUR=EBS fell 0.25% to $1.0834, having previously hit $1.0811, its lowest since August 2. The yen JPY=EBS fell 0.07% against the dollar to $149.76, having traded at $150.08 the previous day, its lowest since August 1.
September’s employment report was much better than expected, increasing optimism that the U.S. economy remains in good shape.
Since the U.S. central bank surprised some market participants in September with a larger-than-usual rate cut, Fed officials, including Fed Chairman Jerome Powell, have pushed back against the prospect of another 50 basis point rate cut. .
Traders are currently pricing in an additional 44 basis point cut by the end of the year, and the probability of a 25 basis point cut in the next two Fed meetings is less than 100%. They had previously seen an additional 50 basis point rate cut likely at one of these meetings. fed watch
Meanwhile, betting site Polymarket shows that the odds of Donald Trump winning the US presidential election in November are increasing.
The Trump administration is expected to introduce new tax cuts, loosen corporate regulations and enact new tariffs, which analysts say could boost growth and inflation.
Bechtel said election-related hedging has helped the dollar’s recent strength, with much of the activity taking place against the Mexican peso and the Chinese yuan, adding that “there are two major issues with all sorts of tariff-related frictions and trade-related frictions. “This will be our main target.” ”
Meanwhile, the euro fell as traders priced in more dovish policy from the ECB and Europe could also face tariffs under President Donald Trump as the region faces a weaker economic outlook.
“Further cuts and slower growth will continue to put pressure on European assets. We feel the euro is particularly vulnerable and is one of our favorite currencies to short ahead of the US election.” JPMorgan・Matthew Landon, global market strategist at Private Bank in London, said:
The ECB said on Thursday that inflation in the euro zone was becoming increasingly subdued, while the overall economic outlook worsened.
The Australian dollar strengthened after September’s employment data came in better than expected for the sixth month in a row.
The Australian dollar AUD=D3 rose 0.36% against the US dollar to $0.669.
Among cryptocurrencies, Bitcoin BTC= fell 0.94% to $66,977.
Report by Karen Brettel. Additional reporting by Medha Singh. Editing: Christina Fincher
