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Weak US Retail Sales might boost stocks

US retail sales rose by only 0.2% in February after a 1.2% drop a month earlier (revised from -0.9%). The values came out weaker than expected, further strengthening the arguments of those pointing to recession risks in the US economy.

This news puts additional pressure on the dollar, which has been attempting to consolidate after a 6% decline from the peak for a little over a week. Rising speculation about an imminent Fed rate cut is also weighing against the dollar.

However, we would also not want to lose sight of the broader picture. US retail sales (adjusted for seasonal factors but not inflation) are increasing by 3.2% y/y against the overall inflation rate of 2.8%, which means we see a real increase in activity, albeit not a high one.

For equity markets, the bad news on the economy and bringing the key rate cut closer could be a positive on which to build the foundation for the next market rally.

Author

Alexander Kuptsikevich

Alexander Kuptsikevich, a senior market analyst at FxPro, has been with the company since its foundation. From time to time, he gives commentaries on radio and television. He publishes in major economic and socio-political media.

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