Breaking: US Retail Sales increase 0.7% vs. 0.4% anticipated

Retail Sales in the US rose 0.7% on a monthly basis in July to $696.4 billion, the data published by US Census Bureau showed on Tuesday. This reading followed the 0.3% (revised from 0.2%) increase recorded in June and came in better than the market expectation of 0.4%. 

Retail Sales Ex-Autos rose 1% in the same period, compared to analysts' estimate of 0.4%, while Retail Sales Control Group increased 1%.

"Total sales for the May 2023 through July 2023 period were up 2.3% from the same period a year ago," the US Census Bureau further noted in its press release. "Retail trade sales were up 0.6% from June 2023, and up 2.0% above last year. Nonstore retailers were up 10.3% from last year, while food services and drinking places were up 11.9% from July 2022."

Market reaction

The US Dollar gathered strength against its rivals with the immediate reaction. As of writing, the US Dollar Index was up marginally on the day at 103.20.

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.

USD   -0.02% -0.08% 0.14% 0.34% 0.18% 0.13% 0.04%
EUR 0.03%   -0.03% 0.18% 0.35% 0.23% 0.15% 0.06%
GBP 0.08% 0.05%   0.22% 0.38% 0.27% 0.18% 0.09%
CAD -0.11% -0.14% -0.19%   0.23% 0.05% -0.03% -0.14%
AUD -0.27% -0.30% -0.35% -0.13%   -0.10% -0.15% -0.23%
JPY -0.22% -0.22% -0.26% -0.04% 0.12%   -0.06% -0.14%
NZD -0.13% -0.15% -0.18% 0.03% 0.20% 0.08%   -0.10%
CHF 0.02% -0.01% -0.09% 0.13% 0.29% 0.18% 0.14%  

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).


Economic Indicator

United States Retail Sales (MoM)

The Retail Sales released by the US Census Bureau measure the total receipts of retail stores. Monthly percent changes reflect the rate of changes in such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. Generally speaking, a high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or bearish).

Read more.

Next release: 09/14/2023 12:30:00 GMT

Frequency: Monthly

Source: US Census Bureau

Why it matters to traders

Retail Sales data published by the US Census Bureau is a leading indicator that gives important information about consumer spending, which has a significant impact on the GDP. Although strong sales figures are likely to boost the USD, external factors, such as weather conditions, could distort the data and paint a misleading picture. In addition to the headline data, changes in the Retail Sales Control Group could trigger a market reaction as it is used to prepare the estimates of Personal Consumption Expenditures for most goods.

This section below was published as a preview of the US July Retail Sales data at 06:00 GMT.

  • United States Census Bureau will release the July Retail Sales data on Tuesday, August 15.
  • US Retail Sales are seen advancing by 0.3% in July after rising less than forecast in June.
  • Strong US Retail Sales could revive hawkish Fed bets, boosting the US Dollar.

The United States (US) Census Bureau will publish the country’s Retail Sales report on Tuesday, which is expected to show that the headline Retail Sales number will rise for the third straight month in July. The US consumer spending is likely to show continued resilience, indicating an optimistic outlook for the economy heading into the third quarter.

The United States Dollar (USD) has been consolidating at its highest level in four weeks even after tame United States Consumer Price Index (CPI) data, which briefly cemented expectations that the US Federal Reserve (Fed) is nearing the end of its tightening cycle. US annual headline CPI rose 3.2% in July against a 3.0% increase recorded in June and 3.3% expectations. The Core CPI inflation ticked down to 4.7% YoY in the reported period vs. a 4.8% clip estimated. On a monthly basis, both the headline and Core inflation figures met expectations, arriving at 0.2%.

However, San Francisco Fed President Mary Daly came to the rescue of the Fed hawks, as she said in an interview with Yahoo Finance that “it is not a data point that says victory is ours. There’s still more work to do. And the Fed is fully committed to resolutely bringing inflation back down to its 2% target.”

As the Fed policymakers have repeatedly said that monetary policy moves will depend on incoming data, the focus shifts toward the US Retail Sales report. The high-impact US data release could prompt markets to re-price the Fed interest rate outlook, ramping up volatility around the US Dollar.

What to expect in the July US Retail Sales report?

The headline Retail Sales are likely to increase 0.4% over the month in July, at a slightly faster pace from the 0.2% growth seen in June. Core Retail Sales, excluding autos, are also seen rising 0.4% in July, as against a 0.2% increase recorded in June. US Retail Sales Control Group is expected to increase 0.5%, courtesy of the growth in online sales.  
It’s worth mentioning that the Retail Sales data is adjusted for seasonality but not for inflation.

The potential growth in US Retail Sales could continue to show robustness in consumer spending, despite the Federal Reserve’s implementation of 500 basis points (bps) worth of interest rate hikes since March 2022.

The July retail volume data came in mixed, suggesting a slowdown in the momentum of spending growth. However, that did not alter the Federal Reserve’s decision to hike the policy rate, federal funds rate, by 25 bps to the range of 5.25-5.5% last month.

Analysts at TD Securities see one more month of healthy growth:

“We expect Retail Sales to rise for a fourth consecutive month in July after 0.2%-0.5% MoM gains in Q2. Volatile auto sales will likely add to growth while sales in gas stations were a minor obstacle. Importantly, the control group is expected to stay firm, with online sales benefiting from Amazon's Prime Day. We also look for sales in bars/restaurants to expand at a brisk pace.” 

When will US July Retail Sales data be released and how can it affect EUR/USD?

The US Retail Sales data for July is due to be published at 12:30 GMT on Tuesday, August 15. Investors are weighing in on the next Fed policy path, keeping the upside capped in the US Dollar. Therefore, the EUR/USD pair could extend its bearish consolidative phase. Upbeat US Retail Sales data could reinforce the buying interest in the Greenback, fuelling a fresh downtrend in the main currency pair.

Conversely, if the details of the Retail Sales report disappoint, hopes of any further Fed rate hike will be crushed alongside the US Dollar. Worries over a potential ‘soft-landing’ will resurface, which could limit the US Dollar’s weakness. Markets are currently pricing in about a 25% probability of one more Fed rate increase this year, as per the CME Group FedWatch Tool.

Meanwhile, Eren Sengezer, European Session Lead Analyst at FXStreet, offers a brief technical outlook for the major and explains: “The 14-day Relative Strength Index (RSI) on the daily chart retreated below 50 and EUR/USD closed below the 100-day Simple Moving Average (SMA) for the first time in nearly two months, reflecting a bearish bias."

Eren also outlines important technical levels to trade the EUR/USD pair: “On the downside, 1.0850 (static level) aligns as interim support before 1.0770 (200-day SMA) and 1.0680 (static level from June). Looking north, buyers could show interest in case EUR/USD makes a daily close above 1.0940 (100-day SMA) and starts using that level as support. In that scenario, 1.1000 (20-day SMA, psychological level) could be seen as the next recovery target ahead of 1.1150 (July 27 high)."

US Dollar FAQs

What is the US Dollar?

The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.
Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.

How do the decisions of the Federal Reserve impact the US Dollar?

The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.

What is Quantitative Easing and how does it influence the US Dollar?

In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.

What is Quantitative Tightening and how does it influence the US Dollar?

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.

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