Strong Retail Sales in the United States Fail to Send the USD Higher

FXOpen

Last Friday, the Retail Sales in the United States took everyone by surprise. On expectations of 0.7%, the actual number of 1.9% showed a resilient consumer, one that still has resources to spend. However, the impact on the currency market was minimal. In fact, the USD traded with a dovish tone all Friday, unable to react to the news.
But how is it possible for the retail sales to beat expectations in such a way during an economic recession?

Strong Retail Sales in the United States Fail to Send the USD Higher

Understanding the U.S. Consumer During the COVID-19 Pandemic

To fully understand the logic behind Friday’s number, we need to understand the role of the consumer in an economy. If the consumer does not spend, economic growth is not possible. Therefore, the news coming out of the United States is more than encouraging.
But it would not have been possible without the fiscal package delivered by the U.S. Congress. The checks sent to the population (between $300-$600/week) were enough to keep the economy floating and make sure that people have enough resources to make ends meet. Some funds were immediately spent, but some were saved for later. This is what this current jump in the retail sales number is about – funds that were initially saved, as suggested by the high savings rate, were spent at a later stage.
So what did the Americans buy? To start with, they bought cars. This is a worldwide trend as it represents one of the responses to the COVID-19 crisis. People avoid public transportation and shift to cars.
Also, sporting goods and discounted clothing were on the rise. As American prepares for the cold season, people took advantage of the last warm days. All in all, the retail sales recovered all the lost ground during the pandemic so far, exceeding the pre-crisis levels.
The problem is that this rebound is only temporary. If there is no more fiscal support, the pandemic threatens the recovery as millions of Americans are unemployed.
The USD and the stock market did not react to the positive data showed by the retail sales indicator for a single reason – the upcoming U.S. elections. Therefore, expect the USD to move in tight ranges until the elections are behind us.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

Latest from Financial Market News

Economic Calendar: US PMI Data, Stock Market Decline, and Oil Surge Britain's Economy: Balancing Act Amidst Gloomy Metrics and Resilient FTSE 100 This Week’s Economic Calendar: US Employment Data, Eurozone Inflation Figures, Canadian GDP Numbers, and Best Buy and Salesforce Earnings Reports Economic Calendar: Jackson Hole Symposium, Nvidia Earnings Report, Canadian Retail Sales Data Economic Calendar: OPEC Report, US Inflation, UK GDP, and China’s Export and Import Data

Latest articles

Weekly Market Wrap With Gary Thomson: UK STOCK MARKET RISES, S&P 500 FALLS, OIL ANALYSIS, EUR/GBP

Get the latest scoop on the week's hottest headlines, all in one convenient video. Join Gary Thomson, the COO of FXOpen UK, as he breaks down the most significant news reports and shares his expert insights. UK stock market rises

Forex Analysis

EUR/USD Analysis: Key Support Zone Resists Selling Pressure

Today, fresh monthly values of the PMI index, which is considered a leading indicator of the state of the economy, have become known: France: actual 43.6, expected 46.2. This is the worst economic contraction since the coronavirus.Germany:

Forex Analysis

USD/JPY Analysis: Rate Reaches Maximum of the Year

This morning, the Bank of Japan's decision on the interest rate, which has been kept at -0.1% since 2016, became known. The rate size remained unchanged. Although surprises could occur due to the fact that inflation is still above

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 60% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.