US Dollar Surges Despite Crashing Retail Sales, Industrial Output

The US dollar is surging against its G7 currency rivals, despite a plethora of disastrous economic reports. With global financial markets deep in the red midweek over concerns of the coronavirus pandemic, investors are pouring into the greenback for shelter. Could the US economy reverse these losses if the nation reopens next month? Or will the country endure a second wave and erase any potential gains?

According to the Census Bureau, retail sales plummeted 8.7% in March, worse than the median estimate of 8%. The losses were felt across the board, led by clothing (-50.5%), furniture (-26.8%), restaurants (-26.5%), and automobiles (-25.6%). There were two industries that experienced gains: food and beverages (25.6%) and health care (4.3%).
Experts are warning that April could be a lot worse since the stay-at-home and major disaster declarations did not become nationwide until the second half of March.
Last month, industrial output declined 5.4%, the steepest drop since January 1946. The market had forecast a slump of 4%. Manufacturing production contracted 6.3%, worse than the projection of -3.2%. All the industries recorded immense decreases, led by motor vehicles and parts, fabricate metal, aerospace, furniture, and utilities and mining.
Capacity utilization also fell from 77% in February to 72.7% in March. Analysts called for a 73.8% reading.
The New York Empire State Manufacturing Index plunged 56.7 points to -78.2 in April, below market expectations of -35. This is the lowest level on record due to historic decreases in new orders, shipments, inventories, and employment levels. New York is the epicenter of COVID-19 cases in the US, and it is unclear if confirmed cases have peaked or not.
On the housing front, mortgage applications surged 7.3% in the week ending April 10, reports the Mortgage Bankers Association (MBA). However, most of the application submissions has been for refinancing amid historically low interest rates and borrowers’ changing situations.
On Thursday, the initial jobless claims numbers come out and the consensus suggests a reading of 5.1 million. If accurate, it would be down from last week’s 6.6 million jobless claims.
The US Dollar Index, which measures the greenback against a basket of currencies, rallied 0.95% to 99.83, from an opening of 98.82. The index has fallen 0.3% over the last week, but it is still up nearly 4% year-to-date.
The USD/CAD currency pair surged 1.34% to 1.4067, from an opening of 1.3882, at 13:51 GMT on Wednesday. The EUR/USD fell 0.97% to 1.0874, from an opening of 1.0983.

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