US consumers cut spending last month, revealing consumers as becoming cautious since the passing of the shopping holiday. December retail sales fell 0.9%, which is the biggest contraction since June 2012. The whole year growth data was also dragged to a 4% expansion, slightly lower than the 4.1% of 2013.
The US Dollar dropped after the data release. The Dollar Yen hit the day low of 116.06, but erased most of its loss later. A long lower shadow is left in the daily chart, which may indicate a short term rebound is coming. However, unless the pair rises above 118, another test of the 115 support is still possible.
The World Bank downgraded their 2015 world growth prospect from 3.4% to 3% during the Asian session yesterday. Fears spread across the markets causing an 8% slump in copper prices. Commodities and stocks around the world were also hit by the growth rate cut. The Aussie Dollar was dragged also to an area below 0.81, but gradually recovered back to 0.8150 this morning. Consolidation may still be the theme in the short term as long as the low exchange rate of the Aussie Dollar is attracting funds to invest in Australian government bonds. The currency now is supported by those buyers as they are betting on the RBA’s rate cut and a lower inflation rate in 2015.
Gold prices rose to $1244 again as retail sales hit the Dollar. It soon fell back to $1230 this morning and left a long upper shadow once again. Technically, we can still assume a short-term retracement is coming and $1240 resistance is effective.
The global stock markets were hit by the lower growth prospects from the World Bank. The Shanghai Composite lost 0.40% to 3222. ASX 200 fell 0.95% to 5353. The Nikkei Stock Average slumped by 1.71%. The losses of European markets were greater still. The UK FTSE dropped by 2.35%, the German DAX lost 1.25% and the French CAC Index plummeted by 1.56%. The US market fell for the fourth day in a row. The S&P 500 closed 0.58% lower to 2011. The Dow lost 1.06% to 17427, and the Nasdaq Composite Index dropped by 0.48% to 4639.
On the data front, Australian Unemployment Rate will be released at 11:30 AEDST. The US weekly Unemployment Claims and PPI will be out at the midnight.
Have a great trading day!
Anthony
NB: Please note all references to rates above are approximate
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