Dollar Rallies on Stronger Retail Sales Report

Last updated 3/12/2009 8:50 AM ET (GMT -5) 0 Comments - Add your comment

Kathy Lien

Director of Currency Research, GFT

The U.S. dollar gained strength against the Japanese Yen following the better than expected retail sales report. This could be a good day for risk if the momentum continues. Despite a weak labor market, falling equity prices and a generally gloomy outlook for the U.S. economy, we have yet to see a major contraction in consumer spending. Retail sales fell only 0.1 percent in February, less than the market's 0.5 percent forecast. Excluding automobile purchases, retail sales rose 0.7 percent. Consumer spending numbers in January were also revised higher with headline retail sales rising 1.8 percent from 1.0 percent.

U.S. consumers continued to spend more money on electronics. The Circuit City bankruptcy as well as cut throat prices have enticed bargain hunters. Spending on furniture, clothing and sporting goods have also increased. Gas prices are rising, boosting the receipts at gas stations. Other than big ticket car purchases, the only thing that consumers are doing is eating out less and cutting purchases of building materials.

However with jobless claims rising from 645K to 654K, this pace of spending cannot continue and if it does, U.S. consumers are really driving themselves into a hole which may be ultimately negative for the U.S. economy and the U.S. dollar.

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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.