- USD Gaining Ground Despite Stimulus Announcement
- Retail Sales Expected to Slow
- Markets Fall on Tax Hike Fears
The US Dollar is looking to end the week on a high as forex market traders retreat slightly to the security and safety it provides. This has put pressure particularly on the Euro which seemed to suffer more than some others. This comes on the first full trading day since the latest US stimulus plan was announced, and in the midst of an important earnings season with retail sales data due later. Markets on Wall Street are set to open lower as many fear the new stimulus will be paid for by a tax hike.
Dollar Steadily Returning to Strong Position
As markets powered higher and higher in recent weeks, those forex trading the Greenback were hardest hit. The traffic had all been in one direction prior to this week. That direction was to sell as optimism swept the economy. Conversely, it is now a huge stimulus package put together to further boost the economy which has been one of the biggest drivers behind a return to strength.
Other key factors though include a big rise in the number of unemployment claims for December as Operation Warp Speed has still failed to live up to its name and stem the tide of COVID-19 cases. With retail sales numbers due later today, traders are taking shelter in the Dollar for the moment at least.
Disappointing Retail Sales Figures Reported
Both retail sales numbers for December, and producer prices made for disappointing reading today. These were both expected to reflect slight negativity with retail sales down for the second consecutive month. Analysts were expecting a dip of 0.1% while producer prices were expected to show an increase close to 0.4%. The actual retail sales number dropped back 0.7%.
This comes as coronavirus cases continued to surge higher throughout December nationwide. Dropping winter temperatures also made it difficult for many to take advantage of outdoor dining facilities where available. These downward pointing numbers follow a decline of 1.1% in November and buck the trend that had previously been improving month after month. Meanwhile the latest stimulus plan of incoming President Biden has provided for an increase in the Federal minimum wage to $15.
Markets Weaken Fearing Tax Increase
Two factors are the major focus when it comes to Wall Street this Friday. Firstly, futures dropped back on the announcement of the new $1.9 Trillion stimulus package. This could be closely related to comments from President Biden who said “everyone will have to pay their fair share”. Forex brokers noted a move into the Dollar while stock futures took a hit with many feeling this implies a tax hike.
The second key area of focus for the day will be the quarterly earnings reports, particularly from the major banks Wells Fargo, Citigroup, and JP Morgan Chase. These could all move the markets depending on how the come in versus the expectations.