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U.S. Dollar – Why It Failed To Rally On Strong Retail Sales

By Kathy LienForexApr 15, 2021 05:39PM ET
www.investing.com/analysis/us-dollar--why-it-failed-to-rally-on-strong-retail-sales-200573302
U.S. Dollar – Why It Failed To Rally On Strong Retail Sales
By Kathy Lien   |  Apr 15, 2021 05:39PM ET
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The U.S. dollar struggled to rally Thursday despite very strong U.S. economic reports. According to the latest releases, the U.S. economy roared back to life in March and early April. Retail sales, the most anticipated piece of U.S. data this week, blew expectations as stimulus checks and vaccinations fuelled robust demand. Consumer spending jumped 9.8% in the month of March, easily outpacing the market’s 5.9% forecast. This was the strongest increase since May of last year. Gas and auto sales contributed to the rise, but spending not including autos still rose 8.4%. Jobless claims also dropped almost 200,000 to 576,000, the lowest weekly reading since the pandemic began, as restaurants, retailers and other businesses rehired. Manufacturing activity is improving as well, with the Empire State index rising to 26.3 from 17.4. These overwhelming positive reports drove stocks to fresh record highs and should have driven the greenback upwards, but there were very few buyers. Instead, the dollar followed Treasury yields lower.

With the unexpectedly large drop in jobless claims, sharp rebound in spending and strong rise in the Empire State survey, the market believes the Federal Reserve will have to re-evaluate its plans to keep interest rates steady until 2023. U.S. policy-makers made it clear that substantial progress needs to be made in the underlying data and not the forecasts for it to start reducing stimulus. And there’s a very good chance that with 38% of the population receiving at least one dose of the COVID-19 vaccine, some of those goal posts will be met this summer.

All of this should be positive for the U.S. dollar, but the greenback and Treasury yields failed to rise. There are a few reasons why this is happening. First, good data could have been discounted by the market. Everyone has been talking about a strong March/April recovery and the numbers confirmed exactly what they were hoping. Second, a large part of the boost in spending was driven by the stimulus check, which will last at most for another month. Third, there’s little evidence that inflation is getting out of hand. This week, Federal Reserve Chairman Jerome Powell made it clear that even though he’s optimistic on the economy, the rise in inflation as transitory. Lastly, Treasury prices fell sharply in the first quarter and there are signs of asset managers taking advantage of the move to buy Treasuries, which drives yields lower.

We are finally beginning to see some weakness in the euro. New coronavirus cases in Germany rose the most since January, putting pressure on the government to increase restrictions. The good news is that vaccinations are picking up across the region. By the end of April, around 20% of the German population is expected to have their first doses. Italy is talking about easing restrictions in May. The Eurozone will still lag the U.S. in recovery, but some countries are beginning to see the light.

The Australian and New Zealand dollars were the best performers. In Australia, more than 70,000 jobs were created in March, which was double expectations. The unemployment rate also dropped to 5.6% from 5.7%. There was only one problem – all of the jobs created were part time. The country lost 20,000 full-time jobs and added 90,000 part time. The Canadian dollar bucked the trend, and ended the day lower against the greenback. Oil prices continued to move higher, producer price growth slowed and manufacturing sales fell more than expected. However, according to ADP, Canadian companies added 634,000 jobs in March, which, if real, is a complete blowout number.

Chinese GDP and retail sales numbers are due for release tomorrow – softer numbers are expected.

U.S. Dollar – Why It Failed To Rally On Strong Retail Sales
 

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U.S. Dollar – Why It Failed To Rally On Strong Retail Sales

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Comments (20)
MICHAEL ZOKO
MICHAEL ZOKO Apr 18, 2021 8:22PM ET
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what happen Africa economic, mostly Liberia
Leroy savoie
Leroy savoie Apr 18, 2021 10:21AM ET
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Crypto Question
mick ey
mick ey Apr 18, 2021 12:43AM ET
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Dollar will make the move in the coming week. Laggards
Luqman Firdaus
Luqman Firdaus Apr 16, 2021 5:25AM ET
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ok darling
Kings Wales
Kings Wales Apr 16, 2021 1:28AM ET
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Even though it didn't really for US dollar. The retail sales report drove Dow Jones to all time high
gary leibowitz
gary leibowitz Apr 15, 2021 10:00PM ET
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Reminds me of the "this time is different" argument in 1929. As for real actual inflation look no further than CPI repots over the last TWO months. Largest jump in how many years?  or the 6 plus GDP expected by everyone.  Ever wonder why Powell went on 60 minutes and then again on TV to assure this bloated helium filled bubble that HE will IGNORE such data for 2 years.  And he will!  But commodities will not!  POW!  So so close to a crash the likes of which have been recently seen but not believed for more than 3 to 6 moths. THIS TIME WILL BE DIFFERENT!  Silly people. Once you start with the premise you have excuses why the data points were ignored RUN FOR THE HILLS!
John Whitfield
John Whitfield Apr 15, 2021 10:00PM ET
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gdp delfator trend says youre wrong. Check out the relationships between demography inflation interest rates and yields.
Jouni Matero
Jouni Matero Apr 15, 2021 10:00PM ET
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Lol one more "economy only goes up" believers
Junk Man
Junk_Man Apr 15, 2021 9:59PM ET
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You seem to have lots of cheer leaders...
Rick Miller
Rick Miller Apr 15, 2021 9:52PM ET
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...AND it hit a huge supply zone from October 2020 that still had open orders..lol
Rick Miller
Rick Miller Apr 15, 2021 9:48PM ET
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I like your detailed reports..very informative. Could it also be as simple as big institutions wanted to sell and if you want to sell billions...you need billions willing to buy...so they just used all of the positive reports as a catalyst to fill their orders and had more than the demand? Just my take...lol.
FATME sahraie
FATME sahraie Apr 15, 2021 8:24PM ET
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🤗hi,dear I'm iranian how to get money from free bitcoin
Muhammad Younas
Muhammad Younas Apr 15, 2021 7:19PM ET
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🤔🤔
hafsa sakhi
hafsa sakhi Apr 15, 2021 6:51PM ET
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🙄
mahmud hasan
mahmud hasan Apr 15, 2021 6:51PM ET
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hello
mahmud hasan
mahmud hasan Apr 15, 2021 6:51PM ET
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hello
Murugan Nta
Murugan Nta Apr 15, 2021 6:39PM ET
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nzdusd sell or buy
CS One
CS One Apr 15, 2021 6:39PM ET
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sell
Mussa Attiku
Mussa Attiku Apr 15, 2021 6:01PM ET
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help me
Jeremie Lemieux
Jeremie Lemieux Apr 15, 2021 5:49PM ET
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How about because nobody wants us dollar anymore?
daniel barreto
daniel barreto Apr 15, 2021 5:49PM ET
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c'mon lemieux let em have it.
Michael Garrett
Michael Garrett Apr 15, 2021 5:45PM ET
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powell said so
Jouni Matero
Jouni Matero Apr 15, 2021 5:45PM ET
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He's next to god so it must be true lol
Jeff Harrington
HJSH Apr 15, 2021 5:28PM ET
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May i repost this article on my website?
Pepe botika
Pepe botika Apr 15, 2021 5:28PM ET
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Chris Black
ChrisBlackforex Apr 15, 2021 4:16PM ET
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Next Week Euro buy?
Dominic Fernandes
Dominic Fernandes Apr 15, 2021 4:16PM ET
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HHahaha...you will be burnt
Markos Sw
Markos Sw Apr 15, 2021 4:04PM ET
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But i will tell u why becouse i know better then u, thay want to push reatailers in indicies and you know why?
Markos Sw
Markos Sw Apr 15, 2021 3:56PM ET
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So what was the reason of was going down?
Gamer Turtle
GamerTurtle Apr 15, 2021 3:56PM ET
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no one knows but can always justify it some way after something happens. price action and fundamental is only correlated when it wants to, another way of saying it is it is NOT correlated other than what ppl tell themselves.
Johnluc Wardy
Johnluc Wardy Apr 15, 2021 3:56PM ET
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Possibly because of biden sanctions on russia
 
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