ForexLive US Wrap: US Economy Surprises to The Upside Again

• US retail sales rise 1.1% in September, ex-autos up 0.6%; better than expected
• University of Michigan consumer sentiment index falls to 57.5 in the early October read from 60.2 in September
• US business inventories rise 0.5% in September
• Barclays raises US Q3 GDP forecast to 2.5% from 2.0%
• Japanese government to unveil new steps against strong JPY as early as next week: Dow Jones
• Geithner: US aid to Europe will be limited to IMF support; IMF funding levels sufficient
• France FinMin: Banks strong enough to improve financial standing on their own
• EU plan taking shape; to include 50% haircut on Greek debt, a backstop for banks, ECB to continue buying bonds-BBG
• Germany's Schaeuble: Government funds a last resort for banks
• S&P downgrades BNP Paribas to AA- from AA; French banking sector dropped to Group 2 from Group 1
• US fiscal deficit $1.299 trln in FY 2011
• IIF's Dallara: Banks won't accept larger Greek haircuts
• US Treasury delays release of semi-annual currency report; avoids China confrontation
• S&P rises 1.75% to 1226; up 6% on week
• US 10 year note yield rises 7 bp to 2.25%
• WTI rises $3.10 to $87.33; gold rises $12 to $1680

EUR/USD rallied after a minor head fake to the downside after the much stronger than expected US retail sales data.

We dipped to 1.3790 just after the data but within about 30 minutes, we began a breathtaking rally which took us as high as 1.3895 before stalling. We spent the balance of the session consolidating gains with traders happy to buy dips toward the former range tops in the 1.3830s. We end the day at 1.3880.

USD/JPY jumped on the report by Dow Jones that Japan will undertake fresh steps to weaken the JPY perhaps as soon as next week. Protection of 77.50 barriers once again thwarted rallies. We close at 77.26.

Commodity currencies end the week well-supported with short-covering still unfolding from macro funds who bet on the end of the world as we now it only to a cloudy by clearing dawn. With the US skirting recession, bearish commodity bets are bleeding…

Originally posted at Forex Live.