VIX Hits 3-Month High, Market Skeptical About Fed’s Power

July 14, 2008

No US economic data was released Monday morning explaining the listless action in the US dollar. Traders are hesitant because they know that things could change dramatically with the 3 event risks Tuesday that could shake up in the US dollar.

The first is the retail sales report for the month of June. Despite a deteriorating labor market and rising food and energy prices, consumer spending should remain positive. Discounters like Wal-Mart (WMT), Costco (COST) and Target (TGT) all reported stronger sales in the month of June, indicating that even though consumers may be trading down, they are continuing to spend their tax rebates. As long as consumer spending does not collapse, there may still be some hope for the US economy. Both the ICSC and SpendingPulse reports also support stronger spending numbers. Excluding autos, SpendingPulse reported that sales rose by the largest amount in 7 months.

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