US Retail Sales Miss Badly -End of the Risk Rally?

Last updated 4/14/2009 9:01 AM ET (GMT -5) 0 Comments - Add your comment

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Boris Schlossberg

Director of Currency Research, GFT

US Retail Sales for March printed much worse than forecast at -1.1% versus expectations of 0.3% gain. Less autos the number also printed weaker at -0.9% versus 0.0% projected. The news  was a blow to recovery bulls who had argued that US consumer demand was stabilizing as the US economy was in the process of carving out a bottom.

The   unexpected downward surprise sent equity futures tumbling in pre-market trade while high beta currencies like the euro, pound and Aussie sold off on risk aversion flows. We noted earlier that the Retail Sales number would be the key event risk for the day stating that “a dour number could trigger a wave of liquidation as both equity and currency traders take profits. “

Still it remains to be seen if equity investors throw in the towel today or simply shrug off the decline in Retail Sales as the peak point of contraction. The bulls continue to argue that the positive impact of the fiscal stimulus has yet to kick in  and should improve consumer spending as the quarter progresses.

After the knee jerk reaction lower, high beta currencies stabilized, but their fate for the rest of the day will likely rest with the direction of equities. If DJIA suffers a triple digit loss the EUR/USD is likely to test the 1.3200 handle from the downside. Meanwhile the Asia Pac commdollars of Australia and New Zealand continue to outperform on a relative basis  and if risk appetite returns they will likely be the first to rally on any bounce in stocks.

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.