After a disappointing -0.2% m/m reading in February, US retail sales surged 1.6% in March, with core sales (ex-automobile purchases) also coming in strong at 1.2% m/m. The stellar reading on the US consumer, combined with disappointing manufacturing data out of Germany and France, has reinforced the “best-house-in-a-bad-global-neighborhood” trade for the US economy and taken the US dollar index up to test key resistance at its 10-month high in the mid-97.00s:
From a technical perspective, the dollar index is showing a large “ascending triangle” pattern, which could foreshadow an explosive rally if the 97.70 barrier is eclipsed. That said, with many financial centers out on holiday Friday and Monday, the lack of newsflow could keep the dollar contained for now.
Looking ahead to next week, Friday’s advance Q1 GDP report will be the marquee event. After Thursday’s blowout retail-sales report, the Atlanta Fed’s GDPNow model is pointing toward a 2.8% annualized growth rate in Q1 and a reading in that range could be the catalyst for a big breakout in the buck next week.