At the end of the week, the market was waiting for data on retail sales in the United States. It turned out that this time the Americans were disappointed, and the data was below the consensus, lowering the stock indices and weakening the US Dollar.
U.S. retail sales increased by 1.2% in July compared to June 2020, reducing the growth rate from 8.4% in mid-year. The publication was also worse than the consensus of 1.9%. The data showed that a renewed increase in COVID-19 infections and a reduction in unemployment benefit controls are likely to affect domestic demand.
U.S. Sales increased in electronics and household appliances stores (22.9% vs. 37.6% in June), gas stations (6.2% vs. 14.8%), various retail stores (6.2% vs. 21.7%), restaurants and bars (5.0% vs. 26.7% a month earlier). At the same time, decreases were recorded in trade in motor vehicles and spare parts (by 1.2% compared to 9.1%), in stores with building materials (by 2.9% compared to 0.8%) and in stores with sports equipment, hobbies, musical instruments and books (by 5.0% compared to 27.6%).
As a result of the above publication, the Dow Jones and S&P 500 indices seem to have fallen as concerns about the economic recovery in the US during the pandemic have emerged. Investors also feared an impasse between Democrats and the White House on the new relief package in response to the economic impact of COVID-19.
After retail sales data in the US, the dollar falls, allowing the GBP/USD pair to return to the five-month high. The UK Brexit negotiator stated that an agreement between the UK and the European Union could be reached already in September. Following earlier announcements of disagreement, the declaration can be welcomed. The pound has a chance to strengthen vs. the US Dollar even towards 1.35-1.36 in the medium term.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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