Ahead today the main focus will be on US data. Retail sales and consumer sentiment are due.
CA-CIB economists expect a 0.2% rebound in January retail sales, with core sales posting a strong 0.4% comeback. A strong print in the latter would suggest solid footing for a meaningful acceleration in Q1 real consumer spending, adding reassurance that the consumer remains a reliable economic growth engine to the support of USD.
Yet on the back of the market meltdown, the report offers little on the outlook going forward as persistent deterioration in financial conditions only raises the risk of negative wealth effects undermining spending habits. Little change to the Michigan survey’s early February read on consumer sentiment would reinforce the view that no adverse shift has occurred yet.
But all in all, the releases should offer limited upside to the USD. The survey’s inflation expectations may draw attention, following the abrupt fall in the New York Fed’s long-term measure earlier in the week and given the importance on well-anchored inflation expectations in the Fed’s inflation outlook.
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