US Retail Sales preview: falling consumer confidence hints a poor outcome

  • Softer-than-expected US inflation hits the greenback ahead of the release.
  • The Michigan Consumer Sentiment fell in August to an almost 1-year low of 95.3.

US August Retail Sales are scheduled to be out this Friday, and once again are forecasted to have grown solidly.  Sales increased in July by 0.5%  as households boosted purchases of motor vehicles and clothing, although May's reading was downwardly revised to -0.1%.  August forecast for headline retail sales is currently at 0.4%. The ex-autos reading, which grew 0.6% previously,  is foreseen posting a 0.5% advance.  The closely watched Retail Sales Control Group, another core reading that excludes auto, gasoline and construction materials, was up in July by 0.5% and is now expected to post a 0.4% gain.

Retail Sales are directly linked to consumer spending and confidence in the economic future, and hence, stronger sales are linked to mounting inflationary pressures. Given the latest US inflation readings, US Dollar bulls now desperately need a solid Retail Sales report.

  After reaching a 10-year high of 2.4% in July, August core inflation eased to 2.2% YoY, still above the Fed's target. Despite the greenback lost ground after the release, the reading fell short from being able to affect the Federal Reserve's current monetary policy, although chances of two more rate hikes this year have decreased from 83.2% to 80.6% following the release and according to CME Fedwatch.  The dollar is also weaker amid improved market sentiment triggered by headlines indicating that the US and China may soon resume trade talks cooling down concerns.

Ahead of the release, the usual hints look gloomy, as US Consumer sentiment in August fell to 95.3, down from 97.9 in the previous month and the lowest in almost a year, according to the University of Michigan, with buying conditions for large household durables falling to the lowest level in nearly four years, anticipating a worse-than-expected reading. Things don't look good for the greenback these days.  But well, we still have Trump and his determination to make America great again.

How to trade the US Retail Sales Control Group with EUR/USD

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