The US dollar and Japanese yen gained against the British pound, Japanese yen, and commodity dollars on Monday, but the moves mostly came during the Asian and European trading sessions as news flow during the US trading session was very light. However, this will change on Tuesday as the Commerce Department is forecasted to report that US retail sales jumped 1.9 percent in August, which would mark the biggest monthly rise since January 2006, led by increased auto and gas station sales. Indeed, as the deadline for the “cash for clunkers” program neared on August 24, eligible buyers likely rushed to take advantage of the deal. Furthermore, this index is not adjusted for inflation, so the steady rise in average gasoline prices during the month should contribute to overall gains.
That said, excluding items like autos and gas, advance retail sales are projected to edge only 0.1 percent higher, following 5 consecutive months of contraction, and there may be even greater upside potential due to “back to school” shopping. Measures of consumption could start to deteriorate once again in September, though, as the impact of the “cash for clunkers” program fades and as unemployment continues its steady ascent. Nevertheless, if the August reading of US advance retail sales reflects strong results, the US dollar could rally in response.
Al Bawaba
