USD Bounces After Higher Retail Sales, but Shows Hesitation

Today was retail sales day, with US sales showing that the US consumer is still in solid shape. We all know that saying, never underestimate the purchasing power of the US consumer which is proving to be right time and time again. The US dollar made a jump following a robust September retail sales report. Headline retail sales increased by 0.7% vs 0.3% forecast, while the control group increased by 0.6% versus 0.0% expected. As a result, the US dollar gained 30 pips across the board quickly but it has stalled now.

Rising Treasury rates were supporting the US dollar somewhat, but are not having the impact they had in the last three months. US 10-year rates are up by 12 basis points to 4.85%, closing in on the 4.88% cycle high set last week and the crucial 5.0% threshold. Tomorrow is a key 20-year bond auction, which might cause large fluctuations in bonds and the currency. Stock markets are also substantially down, with S&P 500 futures down 0.5%, while the USD index DXY jumped higher but has stalled at the 50 SMA on the H4 chart.

US September 2023 Retail Sales Report Highlights

• September retail sales 0.7% versus 0.3% expected
• August sales were 0.6% revised to 0.8%

Details:

• Retail sales MoM 0.7% versus 0.3% expected
• Ex-autos 0.6% versus 0.2% expected.
• Prior ex-autos 0.6% revised to 0.9%
• Control group 0.6% versus 0.0% expected.
• Prior control group 0.1% (revised to 0.2%)
• Retail sales ex gas and autos 0.6% vs 0.3% prior revised from 0.2%
• Retail Sales YoY x.xx% vs 2.47% prior.

Retail sales were higher than predicted across the board, including revisions. Retail sales have now increased for 5 months in a row. Gains of 0.7%, 0.6%, 0.8% last month, and 0.7% this month have been recorded during the previous five months. The consumer accounts for over two-thirds of US GDP. According to this data, the customer is not pulling back in any manner.

Yields are rising, with the 10-year yield up 8.6 basis points to 4.796%. The 2-year yield has risen by 5.3 basis points to 5.15%. Third-quarter growth appears to be robust. The Atlanta GDPNow model predicts 3.1% growth in the third quarter. Today, they will provide a corrected figure. The Atlanta Fed’s projection is normally higher than the consensus, although their estimates have been spot on in recent quarters.