Tomorrow at 12:30 pm GMT Uncle Sam will print its retail sales numbers for the month of April.
Will traders use the report as a reason to extend the dollar’s rally against its counterparts?
Here are points you need to know if you’re trading the event:
What the heck is a retail sales report?
Every month, the government sends out surveys to retailers to measure spending in department stores, electronic shops, car dealerships, gas stations, and restaurants.
The report features a “core” retail sales figure, which removes volatile items such as automobiles from the mix.
Traders pay attention to the release because consumer spending makes up 70% of the U.S. GDP, one-third of which comes from retail activity.
What happened in the previous release?
- March headline retail sales rockets by 9.8% vs. 5.8% expected
- March core retail trading up by 8.4% vs. 5.1% expected
- February headline retail activity revised higher -3.0% to -2.7%
- February core retail sales revised higher from -2.7% to -2.5%
Markets had expected that better weather, jobs growth, reopening businesses, and the stimmy checks had boosted retail activity in March.
What they didn’t expect was for the headline data to come in at a whopping 9.8%. That’s the highest since May 2020! Details revealed that ALL components of the report posted gains, while the core retail sales pointed to a 7% GDP growth in Q1 2021.
But the dollar’s reaction was muted as best. After all, traders already knew that March would be a blockbuster month for consumer spending. Not only that but there were little signs at the time of unsustainably high inflation that could derail the economic recovery.
The dollar ended the day near its pre-report levels against its major counterparts.
What are traders expecting from April’s numbers?
- Headline retail sales to slow down to a 0.3% growth (from 9.8%)
- Core retail activity could print at 0.9% (from 8.4%)
Markets still expect to see growth in retail activity, but April’s numbers will probably be weaker than March’s were.
Headline retail sales is only seen printing a 0.3% uptick, while the core figure is penciled in at 0.9%.
I don’t know about you, but this week’s April inflation numbers got me thinking that consumer spending hasn’t moderated by that much. What do you think?
Planning on trading the event?
Market tells us that the dollar has gained ground against comdolls like AUD and NZD and safe-havens like JPY and CHF in the past week.
Will the retail sales release convince traders to extend existing intraweek trends?
A stronger-than-expected retail sales report would attract more dollar bulls as it puts more pressure on the Fed to reduce its stimulus.
Disappointing numbers, on the other hand, would mean that retail activity has slowed down amidst soaring consumer prices. Not a good look for Uncle Sam’s economic recovery.
Growth concerns could weigh on high-yielding currencies like the comdolls and the pound and boost the safe-havens.
