Retail Sales Rise Again

The latest set of US economic data released today serves as further evidence of the resilience of the US economy. Retail sales were seen rising for a sixth straight month in September, despite consumers grappling with higher rates and higher inflation. Headline retail sales rose 0.7% on the month, well above the 0.3% the market was looking for. Similarly, core retail sales were seen rising 0.6%, again higher than the 0.2% the market was looking for. Along with these readings, both readings for the prior month were revised higher.

Rate Hike Pricing Rising

On the back of the data, market pricing for a December hike was seen increasing to over 40%. The Fed had signaled last time around that a further hike this year was likely this year with rates then forecast to stay higher for longer through 2024. Today’s data shows that any talk of a consumer slowdown is still premature and, as such, US yields and USD look likely to remain well supported near-term.  Industrial production too, was seen coming in above forecasts at 0.3% vs 0% expected. With USD also deriving support from safe-haven inflow currently, the near-term outlook remains favorable ahead of Powell’s keenly awaited speech on Thursday.

Technical Views

US10Y

Yields on 10Yr US paper are pushing firmly higher again this week. Geo-political uncertainty and better-than-forecast US data are seeing yields trading back up towards the YTD highs following a brief correction lower. With yields now pushing on further above the broken bull channel, the outlook remains firmly bullish near-term with 5.240% the next upside target on a break of current highs. 

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