Breaking: US Retail Sales rise 0.4% in April vs. 0.7% expected

The data published by the US Census Bureau revealed on Tuesday that Retail Sales in the United States rose 0.4% in April to $686.1 billion. This reading followed the 0.7% (revised from -0.6%) decrease recorded in March and came in below the market expectation for an increase of 0.7%.

In the same period, Retail Sales ex-Autos rose 0.4% as expected. 

"Total sales for the February 2023 through April 2023 period were up 3.1% from the same period a year ago," the US Census Bureau further noted in its press release. "Retail trade sales were up 0.4% from March 2023, and up 0.5% above last year."

Market reaction

The US Dollar Index edged slightly higher with the initial reaction and turned positive on the day near 102.50. In the meantime, the benchmark 10-year US Treasury bond yield holds steady at around 3.5% while US stock index futures lose between 0.2% and 0.3%, pointing to a negative opening in Wall Street.

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• Retail Sales in the US are expected to rebound 0.7% after dipping slightly in March.
• Robust spending on cars and fuel likely to boost US Retail Sales, US Dollar in turn.
• Meeting between US President Biden and Congress leaders on debt ceiling will be closely eyed.

Retail Sales data in the United States (US) will be released by the US Census Bureau on Tuesday. The headline number is forecast to increase 0.7% in April after posting the second straight monthly drop in March.

The US Dollar (USD) has been on a sustained recovery following last week’s United States Consumer Price Index (CPI) figures for April. The US Retail Sales report could have a significant impact on the US Dollar’s valuation amid a lack of high-impact economic data releases from the US docket this week.

What to expect in the next US Retail Sales?

Tuesday’s US economic calendar features the release of the Retail Sales report for the fourth month of the year.

On a monthly basis, the headline Retail Sales are seen rebounding 0.7% during the reported month. Excluding autos, core Retail Sales are likely to have jumped 0.4% in April as against a 0.4% decline registered in March. US Retail Sales Control Group for April are foreseen at 0%, compared with March’s 0.3% decrease.

Economists expect the increase to be driven by robust spending on cars and fuel. Meanwhile, the Financial Times (FT) reported that “the outlook for retail sales is mixed as continued strength in the labor market and wages is likely to support consumer spending.” 

According to analysts at BBH, “the data highlight will be April retail sales Tuesday. The headline is expected at 0.8% m/m vs. a revised -0.6% (was -1.0%) in March, while ex-autos is expected at 0.4% m/m vs. a revised -0.4% (was -0.8%) in March.  The so-called control group used for GDP calculations is expected at 0.3% m/m vs. -0.3% in March. In late April, the Census Bureau reported its annual revisions to the retail sales data.” 

When is US April Retail Sales report released and how can they affect EUR/USD?

The Retail Sales data is scheduled for release at 12:30 GMT on Tuesday. With the US Dollar recovering ground to reach a monthly high in the wake of mounting US default fears and looming banking sector concerns, the EUR/USD pair remains vulnerable to more downside risks below the 1.0900 psychological mark. Stronger-than-expected US Retail Sales data is likely to help ease economic worries, in turn, lifting the main currency pair at the expense of the Greenback.

On the other hand, weaker Retail Sales details are likely to rekindle recession fears while reinforcing the market’s expectations of a US Federal Reserve (Fed) rate cut as early as July. Worries over a potential economic downturn could provide a fresh leg in the ongoing recovery of the safe-haven US Dollar.

At the moment, markets are pricing in an 82% chance of the Federal Reserve holding rates at the current level in June while maintaining a 33% chance of a rate cut in July.

Heading into the key release, the US Dollar is struggling to extend last week’s rally, as risk sentiment has somewhat improved after US President Joe Biden said over the weekend that the talks with Congress on raising the US government's debt limit were moving along. President Biden added that more will be known about their progress in the next two days.

US President Biden will meet with the congressional leaders on Tuesday for talks on a plan to raise the nation's debt limit and avoid a catastrophic default.

Meanwhile, Dhwani Mehta, Asian Session Lead Analyst at FXStreet, offers a brief technical outlook for the major and explains: “Having breached the critical 21-Day Moving Average (DMA) support last week, the selling interest around the EUR/USD pair remains unabated, as the pair took out the bullish 50 DMA cushion on Monday, The 14-day Relative Strength Index (RSI) is holding well below the midline, suggesting that there is more room to the downside. 

Dhwani also outlines important technical levels to trade the EUR/USD pair: “On the upside, EUR/USD buyers need acceptance above the bullish 50 DMA support-turned resistance to initiate any meaningful recovery toward 1.0950 psychological level. Conversely, immediate support awaits at Tuesday’s low of 1.0845, below which a sharp sell-off toward the ascending 100 DMA at 1.0804 cannot be ruled out.”

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