AUD Holds .7000 Ahead of RBA

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. 

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Dollar Dominance on Strong Retail Sales

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. 

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Dovish Fed Taper, Could BoE Hike?

Once the dust settled, the dollar ended the day virtually unchanged (slightly lower) from its pre-FOMC levels against other the major currencies. Stocks and bond yields ended higher which should benefit the Yen crosses.

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