US Retail Sales Preview: Dollar booster? Low expectations, market mood point to a clear reaction
Premium|Take advantage of 60% OFF on your first month.
Grab this special offer, it's 7 months for FREE deal! And access ALL our articles and analysis.
You have reached your limit of 5 free articles for this month.
BLACK FRIDAY SALE! 60% OFF!
Grab this special offer, it's 7 months for FREE deal! And access ALL our articles and analysis.
CLAIM OFFER- Economists expect a minor increase in US Retail Sales in July.
- Lower expectations seem unjustified amid a rapidly growing economy.
- The greenback is rising amid Fed tapering fears and has room to rise.
Never underestimate the American consumer – everyone visiting the US has seen its shopping culture, either at the mall or by seeing piles of carton boxes outside houses. However, it seems that economists forecasting the upcoming Retail Sales report for July are either underestimating consumers or at least, being a tad too cautious. That implies figures could beat estimates, boosting the dollar.
Economists expect overall sales volume to have dropped by 0.2% in July after an increase of 0.6% in June. Justification to such pessimism may have come from the see-saw recorded in recent months – June's rise came after a drop in May, as the chart shows:
Source: FXStreet
However, July also saw an increase of 943,000 jobs – an excellent figure in absolute terms and also better than expected. Another reason to be optimistic about consumption is the relatively moderate rise in core inflation last month – 0.3% instead of 0.4%. Lower prices allow more consumption.
The Retail Control Group is forecast to rise by 0.3% last month, which is better than estimates for a drop, but substantially below June's leap of 1.1%. Nevertheless, that also seems like a low bar – making it easier to cross.
Here are Control Retail Group figures in the past few months:
Source: FXStreet
Overall, there is room for an upside surprise which would be positive for the dollar.
Dollar positioning
Even if the cautious consensus has it right, the dollar may have room to rise as the wind is blowing in its back. The greenback is benefiting from fears that the Federal Reserve would taper its bond-buying scheme sooner rather than later, according to reports by both CNBC and the Wall Street Journal. An announcement could come as soon as September.
It is hard to see a mediocre consumption report changing that notion, while upbeat statistics could only strengthen that notion – the trend is in favor of the dollar.
The greenback is also benefiting from a risk-off mood stemming from downbeat Chinese figures, the collapse of the Afghan government and the spread of the Delta covid variant in the US and elsewhere. The mood needs to significantly change to make it a dollar-hostile environment.
Conclusion
US Retail Sales figures for July are set to rock markets, and a mix of low expectations and a greenback-positive mood imply the dollar could move higher in response to almost any outcome.
- Economists expect a minor increase in US Retail Sales in July.
- Lower expectations seem unjustified amid a rapidly growing economy.
- The greenback is rising amid Fed tapering fears and has room to rise.
Never underestimate the American consumer – everyone visiting the US has seen its shopping culture, either at the mall or by seeing piles of carton boxes outside houses. However, it seems that economists forecasting the upcoming Retail Sales report for July are either underestimating consumers or at least, being a tad too cautious. That implies figures could beat estimates, boosting the dollar.
Economists expect overall sales volume to have dropped by 0.2% in July after an increase of 0.6% in June. Justification to such pessimism may have come from the see-saw recorded in recent months – June's rise came after a drop in May, as the chart shows:
Source: FXStreet
However, July also saw an increase of 943,000 jobs – an excellent figure in absolute terms and also better than expected. Another reason to be optimistic about consumption is the relatively moderate rise in core inflation last month – 0.3% instead of 0.4%. Lower prices allow more consumption.
The Retail Control Group is forecast to rise by 0.3% last month, which is better than estimates for a drop, but substantially below June's leap of 1.1%. Nevertheless, that also seems like a low bar – making it easier to cross.
Here are Control Retail Group figures in the past few months:
Source: FXStreet
Overall, there is room for an upside surprise which would be positive for the dollar.
Dollar positioning
Even if the cautious consensus has it right, the dollar may have room to rise as the wind is blowing in its back. The greenback is benefiting from fears that the Federal Reserve would taper its bond-buying scheme sooner rather than later, according to reports by both CNBC and the Wall Street Journal. An announcement could come as soon as September.
It is hard to see a mediocre consumption report changing that notion, while upbeat statistics could only strengthen that notion – the trend is in favor of the dollar.
The greenback is also benefiting from a risk-off mood stemming from downbeat Chinese figures, the collapse of the Afghan government and the spread of the Delta covid variant in the US and elsewhere. The mood needs to significantly change to make it a dollar-hostile environment.
Conclusion
US Retail Sales figures for July are set to rock markets, and a mix of low expectations and a greenback-positive mood imply the dollar could move higher in response to almost any outcome.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.