US Monthly Retail Sales Overview

Wednesday's US economic docket highlights the release of monthly Retail Sales figures for December, due later during the early North American session at 13:30 GMT. The headline sales are estimated to have declined by 0.8% in December, marking the second straight month of contraction. Excluding autos, core retail sales probably climbed by 0.4% during the reported month as compared to a modest 0.2% fall in November.

Analysts at TD Securities (TDS) offer a brief preview of the key macro data and explain: “We look for retail sales to have retreated sharply in December (-1.2%), building on a more modest decline from the prior month. Spending was dented by significant contractions in auto and gasoline station sales. Importantly, control group sales likely also fell for a second consecutive time (-0.3%), while those for bars/restaurants probably advanced slightly for a fifth month straight.”

How Could it Affect EUR/USD?

Ahead of the release, the US Dollar languishes near a seven-month low amid a fresh leg down in the US Treasury bond yields and the prospects for a less aggressive policy tightening by the Fed. Weaker-than-expected US Retail Sales figures will point to a slowdown in consumer demand and reaffirm bets for smaller rate hikes by the US central bank. This, in turn, should exert additional downward pressure on the greenback and allow the EUR/USD pair to capitalize on its intraday positive move beyond the multi-month high touched on Monday.

Conversely, better-than-expected data could trigger a short-covering around the buck. The immediate market reaction, however, is likely to be limited as investors now seem convinced that the Fed will soften its hawkish stance amid signs of easing inflation pressures. This, in turn, suggests that the path of least resistance for the EUR/USD pair is to the upside and any meaningful dip might still be seen as a buying opportunity.

Key Notes

 •  US Retail Sales Preview: Forecasts from six major banks, consumers cautious about opening wallets to retailers

 •  EUR/USD Forecast: Bulls retain control ahead of final Eurozone CPI, US macro data

 •  EUR/USD likely to trade in 1.12-1.15 range ahead – Citigroup

About US Retail Sales

The Retail Sales released by the US Census Bureau measures the total receipts of retail stores. Monthly per cent changes reflect the rate of changes in such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. Generally speaking, a high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or bearish).