Retail Sales Miss In October
US retail sales were seen growing at a slower-than-expected pace over October. The data released yesterday showed growth of just 0.3% over the month, undershooting expectations of a 0.5% reading, and marking a firm decline since the prior month’s 1.5% reading. Core retail sales were equally disappointing at 0.2% on the month, undershooting expectations for a 0.6% reading while marking a firm fall from the prior month’s 1.2% reading. The data reflects a heavy loss of momentum in consumer activity and the economic recovery as whole over the month. Given that retail sales are a core component of the GDP reading, the news will be disappointing for the Fed.
Fresh COVID Fears
A resurgence in the spread of COVID over the last six weeks, which has seen new cases and deaths surging, has clearly curtailed retail activity, with consumers seeking to steer clear of crowded public spaces. While there is now hope that vaccines can start to be introduced unto next year, the market is awaiting further details and confirmation. Furthermore, the loss of government financial support over the period, and the failure of the government to pass a new stimulus package, has also weighed on activity.
Biden Pushing For Stimulus
On Monday, Biden implored Congress to work together for the sake of the American people and pass a new stimulus package. However, given the controversy around Trump refusing to leave the White House, and with a divided Congress, it looks unlikely that this will be achieved ahead of Biden being sworn in on January 20th.
Powell Acknowledges Weakness in Recovery
With this in mind, the current situation places further pressure on the Fed and increases the likelihood that the central bank will need to take further action. Speaking on Tuesday, Fed chairman Jerome Powell acknowledged the slow-down in the recovery. Speaking at the Bay Area Council Business Hall of Fame Awards Ceremony Powell said that “the recovery is incomplete” and warned that “we have a long way to go.” The Fed chair also reiterated his message that the economy needs more fiscal help from the government saying that now is not the time to be concerned for the fiscal health of the US economy which can be addressed in the future when unemployment is low again and tax revenues are restored.
The Dollar index is now turning lower once again. Following the failure at the 93.81 level price has now fallen back below the 92.62 level support and is trading back below the bearish trend line from year to date highs. The main level to watch now is the 91.74 lows, a break of which will open up a test of 90.72 next.
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