Strong retail sales are a factor in a faster unwinding of stimulus by the Fed. And it is not the only factor.
The producer price index rose 0.8% m/m and 6.6% y/y last month, significantly higher than the 0.5% m/m and 6.3% y/y expected. Producer prices are a leading indicator of consumer prices. At a time of strongly increasing final demand, retailers pass on rising costs further down the chain to consumers. Judging by the dynamics of retail sales, this is precisely the case.
Thus, there are more and more signals that the Fed will announce that it is ready to start tapering its asset purchases in the coming months as soon as this Wednesday. However, earlier in the week, the markets did not have much faith in such a scenario, so it would not be surprising if the dollar gains support and the stock markets come under pressure, acting on the principle “the better, the worse”.
Source: FXPro