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Strong US retail sales boost the dollar to new highs
The US economy received a notable boost from an exceptional rise in retail sales during the month of March, which contributed to a strong economic expansion and significantly strengthened the dollar against other major currencies.
The dollar's rise comes amid concerns about the Chinese economy, which saw annual growth in first-quarter GDP of 5.3%, exceeding expectations. Despite annual GDP growth in the first quarter of 5.3%, industrial and retail trade growth for March was lower. Of expectations. Furthermore, new home prices in China saw the biggest decline in eight years, and real estate investment fell by nearly 17% compared to the previous year.
The US Dollar Index hit a five-month high on Tuesday, recording a 4% rise over the past six weeks. This rise came as the Federal Reserve reduced its expectations of cutting interest rates, while other central banks faced pressure to ease monetary policy.
As a result, the euro, the offshore Chinese yuan and the pound fell to their lowest levels against the dollar since November. The Japanese yen also weakened to a new 34-year low of 154.60 against the dollar, and measures of currency volatility reached their highest levels in more than two months.
On Monday, news of an unexpected increase in US retail sales prompted economists to revise their estimates for US economic growth for the first quarter of the year to just under 3% on an annual basis. Morgan Stanley updated its first-quarter GDP growth forecast to 2.7% from 2.4%, higher than expectations of 2.1%. The Federal Reserve Bank of Atlanta's "GDP Now" estimate was 2.8%.
These numbers reinforced the economic “no-fall” scenario, indicating continued expansion rather than contraction. Fed officials have urged caution in response to the data, with San Francisco Fed President Mary Daly saying: “The worst thing you can do is act urgently when there is no urgency.” Therefore, Fed futures do not expect a rate cut until September.
Amid these developments, Federal Reserve Chairman Jerome Powell, European Central Bank President Christine Lagarde, and Bank of England Governor Andrew Bailey are scheduled to speak this week. In addition, the International Monetary Fund is scheduled to release its updated report on global economic outlook, as markets await its forecast for growth in the United States.
