Retail Sales Should be Positive for the Dollar – IIC Research
By: Ansar Anis Bhesania,
Ismail Iqbal Commodities (Pvt.) Ltd.
Yesterdays stronger than expected U.S. retail sales report should have been overwhelmingly positive for the dollar and while we did see the greenback appreciate after the release, it has now given up all of its gains. Investors have to look no further than Treasury yields for an explanation on the lack of momentum in the dollar. After the initial release of retail sales, 10 year Treasury yields rose as much as 3bp, which is anemic to begin with but then yields have pulled back.
Despite back‐to‐back improvements in U.S. data, investors are unimpressed. As long as the U.S. economy recovers at a steady pace, the Federal Reserve will continue to taper and bring asset purchases down to zero by the end of the year. Last month, Fed Chairwoman Janet Yellen said rates will increase 6 months after QE ends but since then, traders have dialed back expectations after policymakers stressed the need for low rates. Until more Fed officials get on board with the idea of tightening, the dollar will have a tough time recovering.