The US dollar index is trading flat this morning following yesterday’s weak data. Retail sales ex-autos fell 1.2 percent month to month, the most significant drop since 2009. However, consumer confidence is a big part of consumer spending, and several factors hit the consumer negatively in December including the stock market selloff and the government shutdown. This is why we should take this data with a grain of salt.
Regarding the US-China deal, the Treasury Secretary Steven Mnuchin tweeted that the meetings with China’s Vice Premier Liu He were “productive.” However, people familiar with the discussions seem to be less cheery, saying China is resisting US demands for further structural economic reform. In general, market participants are becoming increasingly cautious as the round of talks looks set to wrap up without a resolution.
In other news, President Trump is expected to sign Congress’ compromise funding bill later today, while at the same time making use of his executive powers to declare an emergency at the border to unilaterally shift about $7 billion of federal funds towards the construction of his wall.
Later today, at 9:15 am, market participants will receive the US industrial production news for January, with expectations for output growth to cool to 0.1 percent from December’s 0.3 percent. Finally, the latest University of Michigan sentiment numbers land at 10:00 am.