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US Retail Sales increased, indicating the economy can handle Fed rises


US stocks declined lower on Wednesday, failing to preserve their upside momentum and witnessing selling pressure after strong retail sales data and comments from at least two Federal Reserve speakers recast bets that the central bank’s policy tightening regime is nearing an end.

The US Retail Sales rose by 1.3% in October, which came in better than the market expectation for an increase of 1% and indicated the economy can withstand additional Fed hikes. The figure weighed on equity markets amid speculation that inflation may resume its advance and the US Federal Reserve could maintain the aggressive tightening path.

Moreover, former President Donald Trump announced he will seek another term in the office, launching his Presidential run for 2024. The news lifted concerns amid his views on the US relationship with China.

On the Eurozone front, European Central Bank (ECB) Vice President Luis de Guindos said that the ECB would continue with policy normalisation and continue the restrictive monetary policy.

The benchmarks, S&P 500 and Dow Jones Industrial Average both declined lower on Wednesday as the S&P 500 fell after a report showed retail sales posted the biggest increase in eight months in October. The S&P 500 was down 0.8% on a daily basis and the Dow Jones Industrial Average also dropped slightly with a 0.1% loss for the day. Nine out of eleven sectors in the S&P 500 stayed in negative territory as the Energy sector and the Consumer Discretionary sector are the worst performing among all groups, losing 2.15% and 1.46%, respectively. The Nasdaq 100 meanwhile retreated the most with a 1.4% loss on Wednesday and the MSCI World index was up 1.1% for the day.

Main Pairs Movement

The US dollar edged lower on Wednesday, gathering some strength in the late US trading session and ended the day mixed amid a worsening sentiment following Tuesday’s developments in the Ukraine-Russia war. On top of that, tensions arose in China as the country keeps reporting increased coronavirus contagions and Regional lockdowns spread across the country are worsening the situation. The US Retails Sales also smashed forecasts and pressured the Federal Reserve.

GBP/USD advanced higher on Wednesday with a 0.41% gain after the cable rebounded towards the 1.1920 mark and recovered some of its daily gains as UK inflation surged. On the UK front, the significant jump in the UK inflation rate has triggered chances of further policy tightening by the BOE in the upcoming monetary policy announcements. Meanwhile, EUR/USD remains sidelined around a 4.5-month high and paused a two-day uptrend below the 1.0400 mark amid mixed market sentiment. The pair was up almost 0.44% for the day.

Gold retreated lower with a 0.29% loss for the day after testing the weekly high around the $1786 mark during the European session, as the mixed data from the US spurred a risk-off impulse and provided support to the US dollar. Meanwhile, WTI Oil dropped sharply with a 1.53% loss for the day as the Druzhba pipeline, which carries Russian oil into Europe, is said to have been restored.

Economic Data

CurrencyDataTime (GMT + 8)Forecast
AUDEmployment Change (Oct)08:3015.0K
EURCPI (YoY) (Oct)18:0010.7%
GBPAutumn Forecast Statement20:30 
USDBuilding Permits (Oct)21:301.512M
USDInitial Jobless Claims21:30225M
USDPhiladelphia Fed Manufacturing Index (Nov)21:30-6.2