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Retail sales for the month of January dropped by 0.4%, and core sales remained flat. They were expected to remain flat after a rise of 0.2% in December. Core retail sales were expected to advance by 0.1% after a nice rise of 0.7% in December. December’s numbers are prior to revisions, which are common. Update: previous data was revised to the downside, making the data even worse: sales dropped 0.1% and core sales rose by only 0.3% in December according to the new data. The bad weather in the US during this winter undoubtedly played a role in the indicators and in expectations.  

Towards the release, EUR/USD continued its recovery, rising to 1.3675. GBP/USD was also partying, rising to 1.6650. USD weakness was also evident in USD/JPY, as the pair lost the 102 level. The bad data on all fronts weakens the dollar, and GBP/USD is at a new multi-year high.

Update: here is more on the pound’s new multi-year highs.

Update 2: After the USD sell off, we can see a counter move. EUR/USD is already back to the pre-release levels, around 1.3670.

US jobless claims stand at 339K, a bit above expectations. They were expected to remain at the same levels seen last week: 331K. With many distortions in the unemployment claims data, the retail sales release has the upper hand in influencing markets.

Is the market accepting the bad weather story? It seems so, as the current storm hits the US.

Retail sales are very important in the US, as the economy is based on consumption. The weak figures for January that came on top of a weaker report for December certainly have their effect. Bad weather is taking its toll also now in the US: the retail sales figures were released late because of the current storm.

Earlier in the week, the new Fed Chair Janet Yellen sent a message of continuity in the Fed policy, and calmed markets. While QE tapering is expected to continue in March, a lot depends on the jobs report for February.

Further reading:  Taper Tantrums or the Start of an Emerging Markets Forex Crisis?