As per the latest retail sales data from the USA, the month of January saw an increase of 3% in consumer spending. Overall, the final value reached $697 billion in the month of January, which tells us there's enough space for the Fed to continue its policy.
During December, retail sales were down by 1.1%, and for January, the market was expecting a value of 1.8%. But the actual value of 3% was a surprise for the market participants and economists alike.
Enough Room For Fed To Exercise Its Policy
This is an indication that despite the high inflation in the country, people are still spending money. In addition, this also gives more room to the Fed so that it can continue to exercise its current policy. The end result of this whole scenario will be negative for the equities but positive for the US Dollar.
Coming back to the retail sales data, the ex-autos sector saw an increase of 2.3%. As per the analysts, only an increase of 0.8% was expected, which tells us that the month of January was way better than what others were hoping for!
Overall, the period between Nov 2022 - Jan 2023 was 6.1% higher than the same period around a year ago. And if we compare the current data with December 2022, the increase was 2.3%.
Similarly, the retail sales data compared with last year reveals that an increase of 3.9% has occurred so far!
After the release of the US retail sales, the US Dollar gained strength and added a 0.65% upside to the US Dollar index. So overall, the market took the retail sales data as positive and bought the USD in the FX market against other currencies & commodities.
At the time of writing this, the USD index was trading near 103.93 and was bullish in the near term. Similarly, the XAU/USD and even the FX pairs were positive after the economic data release.
In our opinion, the retail sales data further improved the already bullish sentiment from the CPI release a few days ago.