Never underestimate the US consumer – shopping is central to America’s economy, but with cuts to unemployment benefits, economists expect a pause in expenditure. As the last top-tier release of the week, the greenback is set to react.
Roughly 70% of the world’s largest economy is centered on consumption, and pandemic-related stimulus checks have pushed that forward. In September, a mix of higher inflation – 5.4% YoY – and the expiry of a federal top-up to jobless benefits has likely pushed spending down by 0.2%, according to the economic calendar.
A weak figure would show that the economy is slowing down, thus negative for the dollar, while a strong outcome would show that the recovery from the pandemic is going strong – dollar positive.
Contrary to early in the week, the wind is now blowing against the dollar. The Federal Reserve’s meeting minutes showed that the world’s most powerful central bank is set to reduce stimulus – but do it gradually. The Fed will taper its $120 billion/month bond-buying scheme at a pace of $15 billion/month rather than $20 billion that some had expected.
Moreover, the market mood improved in response to efforts to alleviate supply chain issues, such as work around the clock in LA’s ports. A better market mood means a weaker dollar – and that sentiment will likely persist.
Levels from top to bottom: 1.1705 (late-September high), 1.1670 (late-September low point), 1.1640 (early October swing high), 1.1610 (early October cap), 1.1585 (mid-October resistance), 1.1560 (early October support), 1.1540 (mid-October support), 1.1525 (2021 low), 1.15 (psychologically significant level).
Expectations stand at -0.2% for Retail Sales, and the volatile nature of this indicator implies a broader range.