USD: Trump trade versus Fed trade

The June US retail sales report exceeded expectations yesterday, with headline sales remaining flat on the month against a consensus 0.3% MoM drop. Slower consumer spending growth, moderating inflation, and rising unemployment rates may impact the sector going forward, and we still expect this to feed into a narrative of lower Fed rates, ING’s FX strategist Francesco Pesole notes.

USD to stabilize before the end of the week

“Those figures did not dent the market’s dovish call on the Fed. A September cut is fully priced in, and 65bp of easing is factored in by year-end. The reason why the US Dollar (USD) has been resilient despite the rise in dovish bets is undoubtedly the emergence of “hedges” for higher inflation, tariffs, and geopolitical risks ahead of a Trump re-election, which is perceived as more likely after the weekend incident.”

“Last week, we were still arguing for some short-term USD weakness on the back of US macro news, but after recent developments in this week’s price action so far, the risks for the dollar are much more balanced. Periods of USD outperformance this summer are more likely as markets have a clear inclination to play the “Trump trade” well ahead of November.”

“The US data calendar includes housing starts, building permits and industrial production for June today. The Fed will release the Beige Book this evening, which may signal some regional strains in the jobs market, ultimately making Fed communication drift further to the dovish side. We continue to expect some stabilisation in USD crosses before the end of the week.”

Share: Feed news

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. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.