Empire State Manufacturing survey drives US Dollar down

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After rising 15.73, this mornings Empire State manufacturing survey data dropped to 11.14. This drove the U.S Dollar lower against all major currencies as it offset a stronger consumer spending report. Recovery of the dollar (or lack there of) has been driven by consistent surprises in US data over the past two weeks and the release of the disappointing Empire State survey was a reminder that recover in the US economy is still uneven. But it is important to remember that consumer spending drives the US economy and therefore the dollar should recover initial losses. There will be definite cause for concern should a similar weakness be seen in the Philadelphia Fed report but otherwise the focus should return to the strong retail sales report.

October saw a 7 month in terms of retail sales showing that US consumer spending increased by 1.2 percent, almost double market expectations. The largest gain seen across the retail sales market was for motor vehicles, although there was an increase in demand for building materials, clothing, sporting goods and online spending. At this pace, it looks like we will have a good holiday shopping season. There have been numerous retailers who have already started discounting products in the run up to Black Friday and this combined with the data from the latest retail sales report should contribute positively to Q4 GDPR.

Elsewhere, the failure for G20 leaders to come up with any concrete measures to address the current global imbalance and / or disparate currency policies suggests that the prevailing market dynamics will persist. G20 leaders did however agree to enhance the existing Mutual Assessment Process by assessing ‘persistently large imbalances’ against ‘indicative guidelines’ which will be assessed in the first half of next year. The result will more than likely be continued resistance to FX appreciation by fixed and rigid emerging Market FX regimes.

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Empire State Manufacturing survey drives US Dollar down

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