Strong U.S. Consumer Spending Drives Retail Growth

U.S. consumer spending rose 0.7% in November, surpassing estimates. The DXY edged lower, while gold and oil prices faced volatility ahead of the FOMC meeting.

U.S. retail sales surged in November, continuing a robust streak of consumer spending, offering a hopeful sign for the economy amid an uncertain global backdrop. Retail sales rose by 0.7% month-over-month in November, surpassing analyst expectations of a 0.6% increase. This marks the third consecutive month of gains, highlighting strong demand during the critical holiday shopping season. Additionally, the October sales figures were revised upward from 0.4% to 0.5%, further confirming the strength of consumer activity.

Sectors such as motor vehicles and parts dealers, non-store retailers, sporting goods, hobby, musical instrument, and bookstore outlets recorded the largest gains.

Despite these strong retail figures, the Dollar Index (DXY) initially dipped, edging lower from 106.95 to a session low of 106.75 before recovering, hitting the 107 mark.

Implications for the Asia Session

As Asian markets opened, the DXY remained around 107, while gold prices drifted lower towards $2,630 per ounce, continuing the downward trend that began last Thursday. Crude oil prices faced a volatile session, dipping below $69 per barrel before steadily climbing towards the $70 mark. Crude oil has been under significant pressure since the start of the week, shedding over 3.5% at its lowest point.

The Dollar Index (DXY)

The U.S. Federal Reserve will conclude its final meeting of the year on Wednesday, and analysts are anticipating a 25-basis-point rate cut, marking the third consecutive reduction. However, concerns about inflation remain, as both consumer and producer price indexes have shown signs of accelerating in recent months. The focus will be on Fed Chairman Jerome Powell’s press conference, where markets expect a ‘hawkish’ stance despite the rate cut. As a result, the DXY is likely to experience significant volatility during both the statement release and the press conference.

Strong U.S. Consumer Spending Drives Retail Growth

Key Events Today

• FOMC Statement (7:00 pm GMT)
• FOMC Press Conference (7:30 pm GMT)

Expectations for Key Assets

• Gold (XAU): Gold prices will likely remain volatile as traders assess the Fed’s actions. With inflation concerns still looming, any ‘hawkish’ statements from the Fed could drive gold prices down further despite the potential for a rate cut.
• Australian Dollar (AUD): The Aussie fell 0.5% on Tuesday and continued its downward trajectory as it hovered near 0.6320. Market participants should expect pressure on the AUD, with support at 0.6300 and resistance at 0.6380.
• New Zealand Dollar (NZD): Like its Australian counterpart, the Kiwi experienced a 0.55% drop, stabilizing at 0.5740 as the Asia session commenced. The Kiwi remains under pressure with support at 0.5740 and resistance at 0.5810.
• Japanese Yen (JPY): The USD/JPY pair eased nearly 0.6%, shedding almost 60 pips after six straight days of gains. The yen’s weakness continues to elevate this pair, with support at 152.00 and resistance at 154.60.
• Euro (EUR): The euro remains under pressure as inflationary concerns persist, with November’s preliminary CPI figures showing an increase in inflation. Analysts expect the euro’s strength to weaken further, especially as it hovers below the 1.0500 mark, with support at 1.0500.
• Swiss Franc (CHF): The franc remains weak, with the USD/CHF pair surging before retracing. It remains elevated in the Asian session, with support at 0.8880 and resistance at 0.8975.
• Pound (GBP): UK inflation has accelerated, with headline and core CPI figures set to increase in November. This could provide tailwinds for the pound, though the market remains cautious.
• Canadian Dollar (CAD): The Canadian dollar experienced some volatility, strengthening briefly before rebounding past 1.4300. Despite lower inflation in Canada, concerns over slower economic growth and weak GDP figures continue to weigh on the Loonie.

Commodity Market Outlook

• Crude Oil: Oil prices are expected to remain volatile, especially with upcoming inventory data. After a sharp drop on Tuesday, crude prices rebounded, bolstered by the expectation of a higher-than-expected decline in U.S. inventories. The EIA crude oil inventories report will be closely watched later today, with any large drawdown supporting prices.

Next 24 Hours Bias

• U.S. Dollar: Weak Bearish
• Gold (XAU): Weak Bullish
• Australian Dollar (AUD): Weak Bullish
• New Zealand Dollar (NZD): Weak Bullish
• Japanese Yen (JPY): Medium Bullish
• Euro (EUR): Weak Bullish
• Swiss Franc (CHF): Weak Bearish
• Pound (GBP): Weak Bullish
• Canadian Dollar (CAD): Weak, Bearish
• Crude Oil: Weak Bearish

Traders are preparing for the FOMC meeting and ongoing global economic developments, expecting significant market volatility in the hours ahead. With inflation concerns, central bank actions, and commodity price swings in focus, markets will remain highly sensitive to any shifts in the U.S. economic landscape.

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