Retail Sales Mixed, Stocks Dead Cat Bounce

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US retail sales were soft on the headline but the details were solid. US stocks displayed a deadcat bounce, suggesting that false rebounds are ere to stay into next month’s US mid-term election.The New Zealand dollar was the top performer Monday while the US dollar lagged. Chinese CPI is due up next.

US retail sales rose just 0.1% in September in the second consecutive month of lackluster gains but there were signs that Hurricane Florence might have curbed spending. In addition, the closely-watched control group rose 0.5% compared to 0.4% expected.

The market took the report in stride with little reaction in the FX market. USD/JPY had earlier slid to 111.65 to start the week on a soft note.

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The bigger market move came on the Bank of Canada’s business outlook survey. It showed stronger sales forecasts, a tighter jobs market and a jump in investment intentions – and the survey was done before the new NAFTA deal. As a result, USD/CAD fell to 1.2955 from 1.3050 earlier in the day.

The BOC meets next week and the report made a hike a near-certainty and also raised the odds of another hike in December or January. Separately, Canadian exports to China are up 23% in the first half of the year in a sign that Chinese are canceling US orders and redirecting them elsewhere.

Looking ahead, Chinese CPI is the next item on the calendar at 0130 GMT. The consensus is for a slight acceleration to 2.5% y/y from 2.3%. We also continue to await the US Treasury FX manipulation report.
 
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