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US Retail Sales increased, Fed will keep tightening policy


US stocks declined on Thursday, coming under bearish pressure and fell in a choppy session after the latest batch of economic data did little to dial back expectations for the Federal Reserve’s aggressive hikes move. The US Retail Sales rose by 0.3% in August, which came in better than the market expectation for a no-change and fueled the view that the Federal Reserve will keep tightening policy aggressively. Therefore, the upbeat economic data underpinned the US dollar and acted as a headwind for the equity markets. On top of that, market sentiment also facing downside pressure as Bloomberg ran a piece suggesting that China is likely to witness harder days than it witnessed in 2020.

In the Eurozone, the fears about the energy crisis for the upcoming winter and hawkish comments from the European Central Bank (ECB) policymakers both kept the pessimism higher, meanwhile, investors are blaming the ECB for underestimating the pace of inflation.

The benchmarks, S&P 500 and Dow Jones Industrial Average both retreated lower on Thursday as the S&P 500 extended its slide in the US session to close at the lowest level since July 18. The S&P 500 was down 1.1% on a daily basis and the Dow Jones Industrial Average also declined with a 0.6% loss for the day. Nine out of eleven sectors in the S&P 500 stayed in negative territory as the Energy and the Utilities sectors are the worst performing among all groups, losing 2.54% and 2.53%, respectively. The Nasdaq 100 meanwhile dropped the most with a 1.7% loss on Thursday and the MSCI World index was down 1.0% for the day.

Main Pairs Movement
The US dollar advanced higher on Thursday, regaining upside strength and touching a daily high near 109.90 level in the early European session amid the case for ongoing aggressive hikes by the Federal Reserve. In fact, the market’s pricing of the Fed’s 0.75% and 1.0% rate hikes in the next week’s Federal Open Market Committee (FOMC) has also risen to 80% and 20%. The market focus now shifts to the Michigan Consumer Sentiment Index (CSI) for September, which might provide some fresh impulse.

GBP/USD suffered daily losses on Thursday with a 0.62% loss as the upbeat US Retail Sales data released on Thursday has exerted bearish pressure on the cable. On the UK front, the pound might remain under pressure amid the downbeat consensus for the UK Retail Sales data. Meanwhile, EUR/USD is seesawing around parity after mixed ECB official signals and refreshed its daily high above 1.001 level. The pair was up almost 0.18% for the day.

Gold remained on the back foot with a 1.95% loss for the day after dropping to a daily low below the $1,662 mark during the US trading session, as the firmer US dollar and yields undermined the safe-haven metal. Meanwhile, WTI Oil dropped the most in a week with a 4.31% loss for the day and retreated to the $84 area amid demand fears as the US Department of Energy walked back expectations of its plan to restock petroleum reserves.

Economic Data

CurrencyDataTime (GMT + 8)Forecast
CNYIndustrial Production (Aug)10:003.8%
GBPRetail Sales (Aug)14:00-0.5%
EURCPI (Aug)17:009.1%
RUBInterest Rate Decision (Sep)18:307.5%