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Retail Sales Collapse, US Dollar Slammed as 30Y Yield Hits Record Low

Retail Sales Collapse, US Dollar Slammed as 30Y Yield Hits Record Low

Talking Points:

- US Nonfarm Payrolls beat expectations mildly at +252K.

- 30Y US Treasury Bond yield falls to new all-time low at 2.393%.

- EURUSD quickly rallies back above $1.1840.

It’s been a terrible start to 2015 for US economic data, and that trend continued today with the biggest miss in the Advance Retail Sales report since May 2010. The December consumption figures were roundly disappointing, even when adjusting the data for the drop in oil prices (consensus forecasts were skewed negative due to the impact of reduced revenues for gas stations, for example).

Here’s a summary of the data this morning that’s responsible for US Dollar price action:

- USD Advance Retail Sales (DEC): -0.9% versus -0.1% expected, from +0.4% (m/m).

- USD Retail Sales less Autos (DEC): -1.0% versus 0.0% expected, from +0.1% (m/m).

- USD Retail Sales ex Auto and Gas (DEC): -0.3% versus +0.5% expected, from +0.6% (m/m).

Following the data release, the US Dollar was slammed across the board, in large part thanks to US Treasury yields collapsing across the long-end of the curve. The 10-year note yield fell below 1.800% for the first time since August 2012 (the height of the US debt ceiling/ratings crisis) and the 30-year bond yield fell as 2.393% at the time this report was written (the lowest yield on record, eclipsing what was seen around the 2008 financial crisis).

See the DailyFX economic calendar for Wednesday, January 14, 2015.

EURUSD 1-minute Chart: January 14, 2015 Intraday

EURUSD rallied to a high of $1.1845 after the report, having risen from $1.1775 in the minutes beforehand. Fresh yearly and nine-year lows were set earlier in the session at $1.1726; needless to say, it’s been a volatile session.

The fragility of market sentiment will be tested today as positioning is very one-sided: Senior Technical Strategist Jamie Saettele wrote on Monday about the largest speculative long position on record in the futures market. Yields may feed into a covering rally, too: on January 6, we first noted that net-short speculative positions in US Treasury notes were at their highest level since early-2010.

Read more: Momentum Gathering Pace in EUR-crosses - Watch EUR/USD 5-EMA

--- Written by Christopher Vecchio, Currency Strategist

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.