Intraday Market Thoughts

US Consumers Pick Up Congressional Slack

by Adam Button
Dec 11, 2014 23:36

A strong US retail sales report sparked a wave of US dollar buying but Congressional fears snarled the move later. On the day, GBP was the top performer while the yen languished. A midnight deadline faces the US House while Japanese industrial production is next.  As USDCAD breaks 1.15, our Premium long in USDCAD hits 180 pips in the money. We issued a new CAD trade with 3 charts and cancel GBPCAD.

Today's story: The US dollar rallied on its strong consumers, but fell on its weak government. Retail sales ex-autos, gas and building supplies rose 0.6% vs 0.4% and that helped get the ball rolling on what was a very strong day for the US dollar. 

USD/JPY had gained more than 160 pips at the highs but those gains were halved as murmurs from Washington began about Congress playing yet another game of chicken and the possibility of a government shutdown if legislation isn't passed by midnight.

Eventually, Congress will get the job done but it's impossible to say how much drama will come first. With the Christmas break looming, the odds are in favor of a deal but we take nothing for granted and neither does the market.

Aside from the late drama, Thursday's trading had the hallmarks of year-end. Moves were whippy and some of them were tough to explain, but that's how it always is at this time of year.

The other story is oil and the continuing fall in crude to $59.05. It took just 9 trading days to get from $70 to $60 and oil producers around the world are wishing they had hedged. Whenever something falls as far and as fast as oil, there are more winners than losers and even though consumers are winning, falling oilfield employment and investment will cause plenty of pain.

Aside from politics, the calendar is relatively light. The only notable event is at 2330 GMT with Japanese industrial production but it's the final revisions rather than the initial report, so don't expect a market reaction.

Act Exp Prev GMT
Retail Sales (NOV) (m/m)
0.7% 0.4% 0.5% Dec 11 13:30
Industrial Production (OCT) (m/m)
2.9% Dec 12 4:30
Industrial Production (OCT) (y/y)
0.8% Dec 12 4:30

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