Dollar Nears One-Year High Following Retail Sales Data

The dollar index, after testing levels below 106.5 on the last trading day of the week, moved towards the 106.6 region with a rise in the last hour. However, the index ended its five-day streak of gains today with a decline of around 0.2%.

Meanwhile, the DXY continues to remain close to one-year highs and is poised to record a weekly gain of approximately 1.6%. The dollar has been bolstered by robust economic data and hawkish statements from Fed Chairman Powell. Recent developments and released data have weakened expectations for a rate cut by the Fed in December.

Surpassing retail sales estimates in the United States, indicating resilience in the consumer sector, along with an unexpected rise in the New York Empire State Manufacturing Index's business activity, has solidified the dollar's strength. While primary and core producer prices have risen as expected during the week, the annual growth rates exceeded expectations. This situation contrasts with the consumer price index (CPI) data that aligned with forecasts.

Powell reiterated on Thursday that there is no urgent need for a rate cut, emphasizing the strength of the U.S. economy, the solid labor market, and persistent inflationary pressures. These statements reduced the market's expectations for a 25 basis point rate cut in December from 86% at the beginning of the week to below 60%.

In October, the import prices for petroleum products in the U.S. increased by 1.2%, while import prices excluding oil rose by 0.2%. Meanwhile, core retail sales control group recorded a 0.1% decline on a monthly basis, while export prices increased by 0.8%. The New York Fed manufacturing index rose to 31.2 in November, exceeding market expectations.

During the same period, retail sales excluding fuel and automobiles increased by 0.1%, falling short of expectations. Overall import prices rose by 0.3%, following a 0.4% decline the previous month. In October, retail sales increased by 0.4% year-on-year, aligning with market expectations.