AUD/USD: High Hopes For US Holiday Spending to Lift Market Sentiment

Upbeat expectations for holiday spending in the US are foreseen to lift market moods today as Americans rush to the stores to take advantage of Black Friday sales. Despite the effects of Superstorm Sandy and the looming fiscal cliff, forecasts reveal that holiday sales would likely sustain, if not match, last year’s gains.

Yesterday, reports from the world’s largest economy revealed that various sectors of the economy are steadily improving. Manufacturing in the country expanded at its quickest pace in five months in November, with an increase in domestic demand hinting that factories could provide a needed boost to economic growth in the fourth quarter.

The Flash Manufacturing PMI inclined from a three-year low of 51.0 points in October to 52.4 points this month. Meanwhile, claims for jobless benefits dropped considerably last week after Superstorm Sandy pushed claims to its highest level since April 2008. Jobless claims fell from 451,000 to 410,000 in the previous week.

Consumer confidence is also holding up as the Thomson Reuters/University of Michigan’s final November reading on the overall index of consumer sentiment came in at 82.7 points, slightly higher than October’s 82.6 points. Summarizing what the markets seemingly know so far, a gauge of future US economic activity rose marginally in October, suggesting modest growth in the months ahead.

The Conference Board reported that its Leading Economic Index inclined by 0.2 percent in October after rising 0.5 percent in September to register its second consecutive month of gains. Economists say that economic growth would slow in the fourth quarter after expanding by a 2.0 percent rate in the third quarter, and hence, analysts are looking to see if holiday spending would bolster growth to end the year.

The holiday shopping season, which usually accounts for up to 40 percent of a retailer’s annual revenues, begins tomorrow, Black Friday, but some retailers are opening their doors as early as tonight. A Gallup poll released yesterday reveals that American will likely spend an average of $770 on holiday presents this year, essentially unchanged from 2011 spending levels. Holiday sales are also estimated to increase by between 3.5 percent to 3.7 percent.

Meanwhile, the National Retail Federation forecasts that up to 147 Million Americans plan to shop during the Black Friday weekend, a slight downtick from the 152 Million who planned to do so last year. The NRF previously predicted a 4.1 percent increase in holiday sales this year. Although such figures are by no means impressive, the expected gains in spending are foreseen to help the US economy end the year on a rather bright note. As such, risk-on trades are deemed to buoy the AUD/USD, warranting a long position.