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US Retail Sales Lifts USD to highest in 4-weeks, Haven Assets Drop



Highlights:

  • USD finds momentum from NY Fed Dudley’s rate hike faith with US Retail Sales Beat
  • UK Inflation Data shows the BoE has little choice but to stay put on rates, GBPweakens
  • Haven assets Gold and JPY fall aggressively, Bitcoin also drops 10%
  • Sentiment Highlight GBP/JPY shows battle of the weak, but sentiment favors downside

Just when you thought it was safe to call the USD dead, US Retail Sales has to come out and print the best print since December. It’s worth noting that speculative positioning as shown via the CFTC is highlighting USD as an overcrowded short from institutional speculators. This is important because with the combination of NY Fed President Bill Dudley said he would support another rate hike on Monday and the American consumer showing signs of health (consumption is ~80% of US GDP), it’s worth noting that a rally in the USD could linger longer especially against weaker currencies.


Elsewhere, we are seeing the USD pick up the slack as others are letting it out. Looking at other majors, JPY, GBP, and NZD are down around 0.75% on Tuesday. The JPY weakness is thanks in part to the further unwind of haven assets as the geopolitical spat is looking to blow over whereas UK inflation is showing that the Bank of England likely can put to bed concerns of raising rates to stem inflation despite rather weak growth ahead of an uncertain Brexit. Sterling traded at 5-week lows on the inflation data miss. The New Zealand Dollar is looking rather weak thanks in large part to weak dairy sales (~25% of NZ GDP). NZ milk prices fell -0.4% vs. -1.6% previously. NZDUSD has fallen over 4% in the last three weeks of trading on threats from the RBNZ that interventions would give NZ the boost needed.

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