PERU: BCRP Buys Dollars In Spot Market As PEN Holds At Five-Year Highs
- The BCRP bought US dollars in the spot market yesterday for the first time since April 2020, as the Peruvian sol continues to trade at 5-1/2-year highs against the dollar. The central bank bought $27mn at an average of 3.366 per dollar, according to reports.
- BBVA says that the intervention reinforces USDPEN 3.30-3.35 as the support range, and believes that the rally in the PEN may now be running out of steam, particularly given the recent move lower in gold.
- The move by the BCRP comes after softer-than-expected October CPI data over the weekend left headline inflation (1.35% y/y) just above the bottom of the 1-3% target range, and may reflect some concerns among policymakers about the impact of FX strength on the economy.
- With the policy rate already very close to the neutral level, and GDP growth close to potential, there is little room for further rate cuts. The central bank is widely expected to remain on hold at 4.25% again when it meets next week (Nov 13) and is seen staying on hold for the foreseeable future.
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US DATA: Redbook Points To Robust Q3 Retail Sales Momentum, Official Data Or Not
Johnson Redbook Retail Sales rose by 5.8% Y/Y in the week ending Oct 4, bringing growth in the full month of September to 6.1% Y/Y (under their methodology, the month has 5 retail weeks). That's slightly softer than the 6.3% targeted by retailers but would still represent robust sales through the end of Q3.
- Additionally, their preliminary target for October growth (based on retailers' plans) is 5.7% Y/Y.
- It's still uncertain of course, but with every day of the federal shutdown that goes by, it's less and less likely we get the September Census Bureau retail sales report as scheduled on Oct 16.
- In the meantime we will be using proxies such as the Redbook index and the Chicago Fed CARTS index (which uses still-available data including payment card transactions, retail foot traffic, gasoline sales, and consumer sentiment to proxy retail sales ex-autos). These, plus Wards Automotive September sales, have all shown robust activity in the month consistent with a continued uptick in activity (a rough estimate is that nominal ex-autos/gas sales could post around 6% 3M/3M quarterly annualized growth for Q3, the strongest momentum seen since mid-2024).
- The Redbook report also notes: "As Amazon’s annual 48-hour Prime Big Deal Day sales kick off on October 7th, several major retailers have also announced significant promotional sales in advance of Prime Day. Discount stores have performed well throughout the week, buoyed by essentials such as food and household supplies. Looking ahead, October consists of four weeks, ending November 1st on the retail calendar, and includes two major holiday events: Columbus Day and Halloween."
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USDJPY TECHS: Pierces Key Resistance
- RES 4: 152.31 High Feb 19
- RES 3: 151.62 61.8% retracement of the Jan 10 - Apr 22 bear leg
- RES 2: 151.21 High Mar 28
- RES 1: 151.03 Intraday high
- PRICE: 150.82 @ 14:32 BST Oct 7
- SUP 1: 149.05 Low Oct 6
- SUP 2: 148.10/147.67 20- and 50-day EMA values
- SUP 3: 146.59 Trendline support drawn from the Apr 22 low
- SUP 4: 145.49 Low Sept 17
A bullish theme remains intact in USDJPY following Monday's strong start to the week. The move higher has resulted in a breach of resistance at 149.96, the Sep 26 high and a key short-term resistance. This has exposed the key medium-term resistance at 150.92, the Aug 1 high. It has been pierced, a clear break of it would confirm a resumption of the bull leg that started Apr 22. Monday’s intraday low at 149.05 is first support.
