In recent days the Chairman of the Fed Ben Bernanke has commented that unless US economic performance improves he may introduce a third round of quantitative easing. This has caused trepidation on the markets that he may unintentionally devalue the dollar in the long term.
However the release of US Retail Sales data this afternoon indicates that Bernanke may not have to pursue this course. For the seventh straight month retail sales have improved – this time rising 0.8% ahead of economic forecasts. In particular strong department sales figures leading up to the Christmas period have buoyed hopes that the US is in course for recovery.
Commentators have noted that spending has increased due to historically low interest rates and low taxes. President Obama’s decision to extend the Bush-era tax cuts might thereby boost spending further into 2011, and could inform Mr. Bernanke’s decision to further the program of QE when he announces the Fed interest rate decision later today.
by Peter Lavelle with foreign currency exchange specialists Pure FX.
