Dollar Bounces After Insurrection Put Down


Although German retail sales had surprised on the upside (1.9% instead of a 2% decline as the median forecast in the Bloomberg survey implied), the aggregate figures for the region were depressing.  Specifically, retail sales in November crashed by 6.1%. Here the median forecast was for a 3.4% decline.  October's 1.5% gain was shaved to 1.4%.  Separately, the eurozone's December CPI was in line with expectations.  Headline prices are 0.3% below year-ago levels, where it has been stuck since September.  Year-over-year inflation has not been positive since last July.  The core rate has similarly been stuck at 0.2% for the fourth month in December.  

Germany surprised again on the upside.  Factory orders in November rose by 2.3%.  Economists had been expected a modest decline.  Adding to the upbeat message was the upward revision to the October series to 3.3% from 2.9%.  Notable strength (6.1%) was seen in orders from within the eurozone, while domestic orders rose by a more modest but solid 1.6%. This comes not only on the heels of stronger retail sales but also an employment report that showed a decline in the unemployed queues.  Some economists are beginning to talk about Germany possibly escaping a contraction in Q4.  Tomorrow it reports industrial output figures.  There is not always a tight fit, but rising orders are often associated with increased output. 

The euro reached almost $1.2350 yesterday before stalling, and today it is nearly a cent lower in Europe.  Support is seen in the $1.2200-$1.2220 area.  The fact that it stalled after the wide miss of the ADP jobs estimate fits into the scenario we had suggested that the greenback was stretched by the recent sell-off, and much bad news was discounted.  We had anticipated that resilience to a poor national jobs figure on Friday would signal the onset of the correction.  Still, the intraday technicals suggest limited additional euro losses today. It closed last year near $1.2215.  Sterling is quieter and within yesterday's range (~$1.3540-$1.3670) and remains within the range set Monday (~$1.3540-$1.3705). It finished 2020 near $1.3670. 

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Read more by Marc on his site Marc to Market.

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