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Why U.S. Retail Sales Will Rock Markets Friday

Published 05/13/2021, 06:07 PM
Updated 07/09/2023, 06:31 AM
Stocks rebounded sharply Thursday, but the muted price action in currencies suggest that FX traders are not convinced the selling is over. The U.S. dollar gave back a small portion of yesterday’s gains against the Japanese Yen, Swiss Franc and New Zealand dollar, but was virtually unchanged versus the euro and Aussie. Sterling was the only currency to extend its losses versus the greenback on profit-taking after the pair hit two-month highs on Monday. 
 
It was a rollercoaster ride in the financial markets this week, and volatility is not expected to subside tomorrow with the April U.S. retail sales report scheduled for release. Between the abysmal nonfarm payrolls report and the sharp rise in prices, investors are eager to see how well the consumer is holding up. Economists are looking for retail sales to rise 1% month to month, down from 9.8% in March. We think these forecasts are low given the aggressive pace of vaccinations, strong wage growth and the rollback of restrictions. However, credit-card spending numbers have softened, which is a big reason why a slowdown is anticipated.    
 
If retail sales rises by 5% or more, USD/JPY will hit 110 and EUR/USD will fall to 1.20 as taper talk returns. If it comes in at 1% or lower (even worse, negative), concerns about weak job growth and its impact on consumer spending could send equities and currencies tumbling lower. Anything between 2% and 4% growth will probably trigger a modest relief rally. For now, everyone still expects the U.S. recovery to gain momentum. The Center of Disease Control announced today that fully vaccinated Americans can shed their masks in most indoors and outdoor scenarios. This will encourage more Americans to spend after a year of COVID fatigue.
 
Good numbers will benefit high-beta currencies the most because a strong U.S. recovery provides fuel for a strong global recovery. Yen crosses in particular will do well. Euro area nations are beginning to ease restrictions with travel to Europe likely to resume this summer. The euro, sterling and the Canadian dollar – the currencies of three countries that are prime for a stronger recovery – could outperform.

Latest comments

she is suppose to give opposite review so she earn what people loose
Good review of the currency market, learned some new info.
huge fail.
FAIL
Kathy Equities soared Why? I agree with your opinion "it comes in at 1% or lower (even worse, negative), concerns about weak job growth and its impact on consumer spending could send equities and currencies tumbling lower”.
if she knew that, she would be running a billion dollar fund, instead of writing articles, isn't it? :)
kathy, why did gold not respond appropriately after the retail sales report
so thank🎉
On top of that you had the greatest buying opportunity for Walmart the last four days. The stock is so undervalued it should be well above $170 a share. Macy’s and Walmart will fly tomorrow in my opinion
Everyone should’ve bought Macy’s today. You cannot pass up $15.75 a share for Macy’s especially with retail sales tomorrow
buy put options for strong dollar and short call option
ngak ada bhs indo??
but what's overall long term of trend of $ if inflation figures go on increasing? wont $ go down ? from last months we all are seeing +ve data failing $ to go up..
Please pop the bubble.
Well since prices has gotten up at least 5% in pretty much everything it should be an easy beat.
I like Kathy
I’d recommend Buzzfeed if you like her articles
When this reason is wrong, next week it will be upside down cake?
It's a hard work to uncover logic behind overall emotional and impulsive market.
No matter what the numbers are, the market will be looking forward to the upcoming increase in consumer spending due to the removal of mask restrictions.
Consumer spending has nothing to do with mask restrictions but opening of stores. You unvaccinated people, don't take off take mask.
They will be terrible
I believe they will be, but what we will be told is what they want us to hear.
What we hear is only if we listen
Thanks for info.
kathy mentions yen crosses could benefit if retail sales number is good. keep your eye on aud/jpy ... i suggest selling any rally that takes it back up toward recent highs at 85.80. check out a 5 or 10 year chart ... aud/jpy is absurdly high right now. fading any rallies has been a component of my trading strategy for months.
in the 6 months before covid it was trading between 70 and 76 ... and now its near 86??!! what? makes no sense. fade any rallies!
Agree with that... 🤗
but now we have the sound of canons and muted un security committee....lead by China. Iran will go against Israel....domino
everything will be done to avoid a crash. don t worry.
Can I know everything about it
I dont think one little bit of positive data couldnt change the long-term downward, the more-immediate post-covid, biden era, trump economic policy un-doing spiral of USD
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