The U.S. dollar rallied on Monday against some but not all of the major currencies. Our readers should not find the rally in USD/JPY or decline in EUR/USD surprising because we talked about how a soft jobs report changes nothing for U.S. policymakers on Friday who are laser focused on inflation.
Investors bought U.S. dollars after retail sales rose for the third month in a row. The increase in demand was widely anticipated but the increase in overall spending along with spending ex autos beat expectations. This means that while higher prices certainly played a role in the gains, consumers were not discouraged by price hikes to spend more on electronics, sporting goods, books and musical instruments. Spending at clothing stores declined modestly from the previous month but that will change in November and December with holiday shopping. Economists expect a strong holiday season with many retailers starting sales extra early this year in anticipation of shipping delays.
Euro dropped to its weakest level since June 2020 because the European Central Bank is one of the most dovish central banks.
Oil continues to hover near multi year highs with yesterday’s surprise inventory draw numbers only adding to the bullish posture of the market. Although the Biden administration has made several attempts to jawbone the price of oil lower, first by appealing to OPEC to increase production and them hinting that it may release some stockpiles from the SPR reserve most analysts believe that crude and the whole hydrocarbon complex will at very minimum remain steadily bid for the foreseeable future.