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Dollar Rallies on Stronger U.S. Retail Sales

Last updated 10/14/2009 8:58 AM ET (GMT -5) 2 Comments

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Kathy Lien

Director of Currency Research, GFT

Stronger than expected consumer spending in the month of September helped to lift the dollar against all of the major currencies. Overall retail sales fell 1.5 percent last month, the sharpest decline since December 2008. The drop was less than the market's 2.1 percent forecast but the headline number is actually very close to consensus if you factor in the 0.5 percent downward revision to last month's data.  Yet the dollar still rallied because core retail sales doubled expectations with only a mild revision to the prior month's report.  Excluding a drop in car sales, consumer spending increased 0.5 percent compared to 1.0 percent in August.

The details of the report indicate that consumers spent more on furniture, health and personal care which suggests that the recovery in the housing market is filtering into other parts of the economy.  Gas station receipts also increased, albeit as at slower pace.  Back to school sales has kept demand for clothing positive for the past 3 months. As one would expect, the dollar raced higher against the Japanese Yen on the heels on the report.  However our readers should not be surprised by the better than expected retail sales number since we talked at length yesterday about the rise in the ICSC chain store sales report and stronger results from individual retailers.  If you look beyond the drop in spending that is related to the expiration of the cash for clunkers program, the number is good and indicates that the U.S. economy is still on the road the recovery.  

The only problem is that based upon the retail sales reports in July, August and September, consumer spending provided less contribution to GDP in the third quarter than in the second quarter.  Meanwhile import prices continued to rise, reflecting lower deflationary pressures. For the Federal Reserve, the latest economic reports are encouraging but not enough for them to pull the trigger on an exit strategy.  

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Comments (2)

Dr.John

October 14, 2009 at 03:09 PM ET

Dollar Rally??
When?

klien

October 14, 2009 at 03:34 PM ET

At 8:30 when the U.S. numbers were released. Unfortunately it did not last

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About The Author

Kathy Lien began her FX trading career 10 years ago at J.P. Morgan Chase. After graduating New York University’s Leonard Stern School of Business at the age of 18, Kathy joined the bank's interbank FX trading desk and eventually moved to the cross markets proprietary trading desk. In the interbank market, her ability to create solid fundamental and technical analysis from the myriad of information on the market helped her trade forex spot and options. Her experience eventually led her to be chief strategist at Daily FX where she worked until she joined GFT in 2008.

With her knowledge of forex, as well as her experience trading other products, such as interest rate derivates, bonds, equities, and futures, Lien has built a reputation as an international currency analyst. She is frequently quoted on CNBC, Bloomberg, Fox Business and Reuters. Lien has also written for publications like Active Trader, Futures, and SFO magazine. She is the author of the newly updated Day Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Boris Schlossberg.

To buy Kathy’s newly updated Day Trading and Swing Trading the Currency Market: Technical and Fundamental Strategies to Profit from Market Moves, click here.