Recent positive retail sales data and retail core sales from the US, saw much better data than expected, supporting a ā€˜Vā€™ shaped economic recovery. USD subsequently moved sharply higher, dragging down risk FX
and giving a slight boost to US equities.

USD retail sales came in at:

  • +17.7% versus +8.0% estimates and a previous reading of -16.4% (April)
  • Core Retail sales came in at 12.4% versus +5.5% estimates and a previous reading of -17.2% (April)

The dollar index moved sharply higher upon this data release, springing from 96.50 to 97.20.

Currently the dollar index has slipped , trading at around 97.00. Markets are struggling to price better than expected economic recovery data against the rising risks of a second covid-19 virus wave. Moreover a dovish stance from the FED in the previous FOMC meeting is also a bearish factor when assessing USD strength.

Risk currencies have been dragged down by the dollar spike, with AUD, NZD and CAD trading lower.

For now it seems that markets will move on realised data, supporting dollar strength.