The US dollar index (DXY) is on track for the second weekly gain as investors react to the latest retail sales numbers. The index rose to $92.68, which was about 3.85% above the lowest level this year.
US retail sales
The US economy is doing relatively well as the reopening continues. Earlier this week, the Bureau of Labour Statistics (BLS) data showed that the US inflation rose by 5.4% in June, the highest rate since 2008. In the same period, core inflation rose to 4.2%, the highest it has been since the 1990s.
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And on Thursday, data showed that the country’s initial jobless claims declined to 360,000 last week. This is a sign that the labour market is tightening. Furthermore, the non-farm payrolls published this month revealed that the economy added more than 850,000 jobs in June.
Still, the US economy is facing significant challenges. One of the biggest ones is the ongoing chip shortage that is affecting many industries like automobile. Also, the shipping logjam has had a negative impact on the American economy.
The impact of these challenges came on Friday when the US published relatively strong retail sales numbers. The data showed that the headline retail sales rose by 0.6% in June after falling by 1.3% in May. The sales rose by 17.98% on from the same month in 2020 because of the lockdowns that happened.
Core retail sales rose by 1.3% in June after falling by 0.7% in May. According to the bureau, the sales performance was mostly because of the services sector like restaurants and gasoline prices.
Recently, data crunched by Bank of America showed that credit and debit card spending at restaurants rose by 2.7% in June. At the same time, the National Retail Federation expects total retail sales to soar to more than $4.4 trillion this year.
US dollar index forecast
The daily chart shows that the dollar index has made a modest recovery recently. The index has also formed a small ascending channel that is shown in black. Also, it remains slightly above the 25-day and 50-day moving averages. It also seems like it is forming a cup and handle pattern. Therefore, there is a possibility that the index will keep rising as investors target the next key resistance at $93.45.
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