US Retail Sales Preview: Strong July reading could help US Dollar stage another rally – by eren_fxstreet RetailSales SEO Macroeconomics UnitedStates EconomicIndicator
The headline Retail Sales are likely to increase 0.4% over the month in July, at a slightly faster pace from the 0.2% growth seen in June. Core Retail Sales, excluding autos, are also seen rising 0.4% in July, as against a 0.2% increase recorded in June. US Retail Sales Control Group is expected to increase 0.5%, courtesy of the growth in online sales.
The July retail volume data came in mixed, suggesting a slowdown in the momentum of spending growth. However, that did not alter the Federal Reserve’s decision to hike the policy rate, federal funds rate, by 25 bps to the range of 5.25-5.5% last month. According to analysts at BBH, “markets should not just rely on retail sales data to gauge the strength of the consumer, as it only covers goods. Personal spending covers services as well and will give a much fuller picture, but the July reading won’t be reported until July 28 along with PCE data.” The US Retail Sales data for July is due to be published at 12:30 GMT on Tuesday, August 15. Investors are weighing in on the next Fed policy path, keeping the upside capped in the US Dollar.
Conversely, if the details of the Retail Sales report disappoint, hopes of any further Fed rate hike will be crushed alongside the US Dollar. Worries over a potential ‘soft-landing’ will resurface, which could limit the US Dollar’s weakness. Markets are currently pricing in about a 25% probability of one more Fed rate increase this year, as per the CME Group FedWatch Tool.
Eren also outlines important technical levels to trade the EUR/USD pair: “On the downside, 1.0850 aligns as interim support before 1.0770 and 1.0680 . Looking north, buyers could show interest in case EUR/USD makes a daily close above 1.0940 and starts using that level as support. In that scenario, 1.1000 could be seen as the next recovery target ahead of 1.1150 ."
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