Disappointing US economic data cut short a rally in risky assets, sending USD/JPY and the carry trades (long JPY-crosses) lower. US July advanced retail sales disappointed expectations of a pick-up in consumer spending and posted a headline decline of-0.1% vs. a forecast gain of 0.8%. Excluding auto sales, which were boosted by the cash-for-clunkers program, the result was an even weaker -0.6% instead of the estimated +0.1% increase. Factoring out gasoline, autos and building materials, the measure used to calculate GDP, July retail sales fell -0.2%. Weekly jobless claims also tempered risk appetites, as initial jobless claims rose from 554K to 558K instead of an expected decline of similar size. The 4-week moving average of weekly claims rose for the first time since June, in another potential sign that labor markets remain extremely slack. Continuing claims did fall from 6.34 mio to 6.20 mio, but mostly due to benefits expiring rather than new jobs being found. Full text »
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