US retail sales to rise 0.2% in December – TDS

Analysts at TDS expect US retail sales to rise 0.2% in December, a relatively modest gain but consistent with Q4 real consumer spending near a robust 3%.

Key Quotes

“Motor vehicle sales are likely to be a small positive, in line with the better than expected pickup in light weight auto and truck sales (17.8m vs 17.4m previously). Gasoline station receipts will likely make a neutral to negative contribution due to lower gasoline prices, while the cold snap in winter temperatures suggests a hit to spending on building materials and at restaurants. We also expect a modest 0.1% rise in the control group (excluding auto, gasoline station, food services and building material sales), mostly reflecting a moderation following the unsustainable strength in the prior three months. Overall, risks are to the downside for this report.”

Foreign Exchange

The risks are amplified for this CPI print. With US data surprises pressing to the upside, the market pricing in nearly 85% chance of a hike in March (with 2+ cumulatively over the course of the year) and 10yr UST yields in sight of the key 2.60% level, an on consensus print may still not be enough for the USD to find its footing. Against this backdrop, it may require an upside surprise on CPI for the USD to reflect near-term hiking expectations (while a small disappointment could easily see Fed expectations repriced). Taken in conjunction with our below-consensus retail sales print has us inclined to see the USD settle lower. Given backdrop of US yields, we are focused on USDJPY, where 110.80/111.00 acts as crucial support that would open significant downside potential on a break (112 represents resistance on the topside). Meanwhile, 1.21 will be a key barrier on the topside for EURUSD, and a close above should be seen as bullish.”

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