Pressure mounted on Fed Reserve Chairman Ben Bernanke who is due to testify on the U.S. central bank’s monetary policy decisions before Congress later today as the US Commerce Department reported that retail sales dropped by a seasonally adjusted 0.5% in June, much worse than the market expectations of a 0.2% gain. This was the first time retail sales had fallen for 3 consecutive months since 2008, when the US economy was in the midst of a recession.
Consumer household spending represents 70% of gross domestic product in the US and the weak retail sales figures fuelled speculation that the Federal Reserve will intervene and boost the pace of the economic recovery. Easing measures, especially bond buybacks from banks that flood the economy full of liquidity, weaken the dollar and overnight trading saw the US Dollar index which measures the USD against a basket of six weighted currencies dropped for a third day, the longest period of losses in a month. At the time of writing it was down 0.10%, trading at 83.14 and the greenback was down against all its major counterparts.
A third monthly drop in U.S. retail sales showed limited employment gains are having an effect upon the largest part of the economy. Later today the U.S. will publish its latest consumer price index as well as reports on the country’s capacity utilization rate and industrial production.
Yesterday, the International Monetary Fund took the step of revising slightly its estimate for US growth forecast for this year and next, expecting GDP to grow by 2% in 2012 and 2.3% in 2013 and focus for the binary trader should very much be on the US for today as Fed Reserve Chairman Ben Bernanke will deliver his twice yearly report on the economy and monetary policy before Congress.
Also worth keeping an eye on for increased volatility is British CPI and RPI figures released around 9.30am GMT followed by Bank of England Governor King speaking at 10.00am GMT.
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