Retail sales fall in December


Retail sales fell in December, just before the Federal Reserve was no longer confident of tightening. Here are three currencies to buy that serve as a safe haven in an economic downturn: JPY, CHF, and USD.

The trading week is about to end today and two economic data have influenced the price action in the currency market. One was inflation. Released two days ago, it revealed that prices for goods and services in the United States rose 7% last December, the highest rate in nearly four decades.

Another was the retail sales indicator. Came out about an hour ago, missed expectations by a mile.

Retail sales m/m for December came out at -1.9% vs. 0.0% expected. In addition, the basic data, which excludes automobiles, fell even further. On expectations of +0.2%, the actual data showed a decline of -2.3%.

The market did not expect such a slowdown. However, a slowdown in consumer spending, if it persists, will affect economic growth over time.

Considering that the Fed is becoming more comfortable with the start of a new tightening cycle, given the rise in inflation, is the central bank ready to raise rates in the event of an economic slowdown? If so, here are three safe-haven currencies to consider buying: the Japanese yen (JPY), the Swiss franc (CHF) and the US dollar (USD).

JPY

The Japanese yen is the traditional safe haven currency to buy in times of uncertainty. It acts as the perfect refuge from economic downturns and rarely outperforms others.

On top of that, it has a negative correlation with the US stock market. Specifically, a falling stock market causes the JPY to rise.

CHF

The Swiss franc acts the same way with the Japanese yen – like a safe-haven asset. Investors prefer to invest in a currency known for its stability (disregarding the volatility of 2015 triggered by the abandonment of the EUR/CHF 1.20 exchange floor by the Swiss National Bank).

USD

Finally, the US dollar. The Fed could end up increasing and even tightening its balance sheet. But when the tightening translates into a slowing economy and a slowing rate of change in credit, then the curve flattens massively. The US dollar tends to do well in such an environment, as it is the de facto global reserve currency.

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