US wholesale inventories revised up in September
The upward revision of US wholesale inventories for September signals a stronger underlying economic activity, driven in part by significant increases in electrical goods and hardware stocks. This hike is attributed to the ongoing artificial intelligence buildout, suggesting robust future demand in these sectors. Increased inventories can provide a cushion for retailers facing potential supply chain disruptions, thus impacting planning for future sales. With the USD under scrutiny, any sustained inventory improvement could strengthen the dollar, depending on wider economic signals.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). Reuters' report suggests growing economic momentum which might align more closely with the bullish views from several analysts, including JPMorgan and ING.
How firms align
JPMorgan's position aligns with the positive sentiment reflected in the wholesale inventory data, maintaining a target of 1.10. In contrast, BofA's stance remains cautious with a target of 1.04, reflecting concerns over potential economic setbacks as highlighted in /reports/bofa.
What the data shows
Recent revisions in wholesale inventory data point to a generally more positive economic outlook, although concerns remain about external factors influencing growth. For more insights into economic drivers, see /research/economicoutlook.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01US wholesale inventories revised up, suggesting stronger economic activity.
- 02Potential buoyancy for USD as inventory levels improve.
- 03Retailers may face supply chain disruptions despite growing stocks.
- 04Electrical goods' rise signals future demand linked to AI expansions.
Market implications
Traders should monitor the resistance level at 1.080 in EUR/USD, as a break above could signal further strengthening of the dollar. Upcoming data releases on retail sales will also be critical to gauge the ongoing economic sentiment.
Risks to this view
A sharp decline in consumer spending or adverse trade data could undermine this bullish view, prompting a reassessment of inventory levels and their economic implications. If BofA's more cautious outlook prevails, it could lead to a downward revision in targets.
Sentiment by currency
USD+EUR JPY GBPComposite USD score: +0.35
Sources & References
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