Dollar Rallies on Sales Surprise – Euro Undercut on ECB Comments
Jun 13th, 2008 | By Doug Casey | Category: US Dollar & Forex TradingIn the currency market, the dollar rallied against the euro. Late Thursday, the euro was trading at $1.5421 vs. $1.5548 on Wednesday. The buck was supported by better-than-expected retail sales, which boosted expectations for a Fed rate hike.
The Commerce Department reported that retail sales rose by a surprising 1.0% in May, the best increase in six months. Excluding autos, sales rose 1.2%. Economists’ expectations had been for a 0.6% rise in total sales, 0.8% excluding autos.
That report was “serious and raises risks of earlier and more pronounced rate hikes” from the Federal Reserve, wrote Stephen Gallagher, economist for Société Générale.
The strong retail sales figures were shocking in that they show that consumers are continuing to shop, in the face of the lowest consumer confidence figures in decades. Where they’re getting the money is an open question, although it’s possible that the rebate checks are playing in.
Consumer spending projects to 2% annualized growth for the second quarter, and that would be enough to keep the economy “safely away from negative growth,” Gallagher said.
Traders shrugged off a more distressing report from the Labor Department showing that initial claims for jobless benefits rose by 25,000 last week, to 384,000. Continuing unemployment claims gained 58,000, pushing the number up to 3.14 million for the week ending May 31. That was the highest level since early February 2004.
Meanwhile, the euro weakened after European Central Bank executive board member Juergen Stark said the ECB isn’t planning a “series” of interest-rate hikes beyond July. Earlier remarks by ECB President Trichet had raised hopes of just such a sequence.
Source: Dollar Rallies on Sales Surprise - Euro Undercut on ECB Comments
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