USD Selling Pauses

The US Dollar paused in its decline yesterday as the latest Retail Sales data showed that consumer spending jumped far above expectations in March, rising to ten-month highs. The reading had drawn a lot of attention as a result of the direct stimulus cheques sent out over the month which held the potential to cause an upward surge in spending. However, expectations were split with some economists suggesting that as the cheques were signed off on until March 11th, spending might be delayed until the following month.

Retail Sales Soar

However, yesterday’s data showed a significant uptick in activity with the headline figure printing 9.8%, a more than 10% improvement on the prior month’s -2.7% reading and coming in well above the 5.8% reading forecast. Likewise, core Retail Sales were seen rising 8.4% on the month, again marking a more than 10% increase on the prior month’s -2.5% reading and a sharp beat on the 5.8% reading forecast.

Vaccine Optimism Adds Extra Boost

Along with the boost created by the stimulus cheques, optimism over the pace of the US vaccination progress has also helped lift spending with more Americans looking ahead to a broader reopening of the economy in the coming months.

Looking at the breakdown of the data, the increase was largely fuelled by a surge in spending on autos and clothing which rose 15.1% and 18.3% respectively. Spending at restaurants and bars was also seen higher over the month rising by 13.4% while sales at electronics and appliance stores rose by 10.5%.

Weekly Jobless Claims Fall

The Retail Sales reading was not the only encouraging data point yesterday; weekly jobless claims fell well short of expectations at 576k vs 703k. This was also a sharp fall on the prior week’s 769k reading has helped lift sentiment. Among those still unemployed, the recently approved stimulus package has also seen an extension of the government’s $300 weekly unemployment allowance through to September 6th.

Will Spending Continue In April?

Despite the data jump seen last month, the key now will be to see whether activity is able to sustain this momentum across April or if the fading stimulus boost sees spending fall back. In February, Retail Sales turned negative again following a strong, stimulus-driven January reading. So, for now, the USD view remains broadly the same though it seems the data has seen selling pause for the time-being.

Technical Views

USDJPY

The failure in USDJPY on the first move above the bearish trend line has seen price trading back below the 109.86 level. Price is now sitting just above the 108.39 level support. While above here, there is stills cope for the bull move to continue higher. Below there, however, and the 107.11 level is the next zone to watch

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