Wednesday, June 14, 2017

Inflation and Retail Sales, both downside

Surprise the monthly data in the US of inflation CPI -0.1% when expected to remain flat, but even more the fall of Retail Sales, with -0.3% far from the expected +0.4%. This sub-sector, followed by the XRT etf, has been hit hard since last year, and I will analyze its problem.

The signal is clear: both bad results indicate that the US economy is still weak, it is reacting very slowly, so that the tone of the FOMC today can be somewhat dovish (it is perceived by the SP500 SPX which is in slight rise early +0.10%).

The market assumes with these numbers that there will be no more rate hikes than the two assumptions, and therefore the immediate reaction of the 10-year Treasury Bonds TNX, dependent on inflation, which fell very strongly reaching the rate at 2.1 % breaking its average SMA200 support. Obvious, the dollar /DX also felt the blow, and safe haven values ​​such as gold /GC and the yen FXY are on the rise. Everyone waiting for the decision of the FED in a few more minutes, which is discounted will give the Rate Hike, and maybe the graphics will be reversed.

In this 10min chart you see the immediate reaction today to the announcement of 
low CPI and Retail Sales: TNX rate and dollar DXY in fall, TLT and gold /GC upwards.