AUD/USD: Strong Holiday Sales to Buoy Market Sentiment

Market moods are seen to maintain their buoyancy today on positive indications that the year-end holiday shopping season will provide the US economy a needed boost. Research firm comScore reported that online sales last Black Friday hit a record high as more consumers used the Internet to do their early holiday spending. Optimism is set to continue as today marks Cyber Monday, traditionally the largest e-commerce day in the US in recent years.

US stocks posted their biggest weekly rally in five months last week as the US holiday spending got off to an encouraging start. ComScore reported that online sales soared 26 percent on Black Friday to $1.04 Billion from sales of $816 Million last year, the first time ever online retail sales topped $1 Billion. Digital content and subscriptions, including e-books, digital music and video, was the fastest-growing retail category, with sales up 29 percent from last year. E-commerce accounts for less than 10 percent of consumer spending in the US. Nevertheless, analysts say that online spending is growing much faster as shoppers are enticed by lower prices, convenience, and wider selection.

Over the course of the four-day holiday weekend, estimates were similarly upbeat. The National Retail Federation projects that sales over the holiday weekend increased by 12.8 percent as compared to last year as earlier Thanksgiving hours stimulated consumers to spend more. An estimated 139.4 Million adults visited US stores and websites from Thanksgiving through Sunday, up from around 131 Million last year. Total spending rose to $59.1 Billion from $52.4 Billion last year. Further, the average holiday shopper spent $423, also up from $398 last year. Optimism is deemed to continue on today as Cyber Monday is estimated to be the largest online shopping day of the year for the third consecutive year. According to comScore, Americans are expected to spend around $1.5 Billion, up 20 percent from last year’s Cyber Monday, as various retailers have ramped up deals to lure shoppers. The US economy is forecast to slow in the current quarter as uncertainty over the fiscal cliff and the ongoing Euro debt crisis are debilitating economic prospects. Nevertheless, should holiday sales maintain their robust start, the US economy could very well defy expectations.

Meanwhile, a meeting today by Euro Zone finance ministers is presumed to produce an agreement to clear an aid payment for Greece, likely removing the uncertainty over Greece’s future in the currency bloc. Meeting for the third time in two weeks, officials are seen to make another attempt to settle their differences over debt relief measures for Athens and provide a green light to disburse up to 44 Billion Euros worth of needed funds. Nonetheless, the markets are likely to cling to comments by German Chancellor Angela Merkel, French Finance Minister Pierre Moscovici and Greek officials which render optimism that the Euro Zone is very close to reaching an agreement. Hence, a positive market sentiment is believed to weaken the safe haven US dollar, warranting a long position for the AUD/USD.

Aviv N. Shapiro is a Senior Research Analyst and Business Development Officer for AlgosysFx.