TRADING THE NEWS: U.S. RETAIL SALES

A 0.3% rise in U.S. Retail Sales may spark a limited reaction as it does little to alter the monetary policy outlook, but a marked rebound in household consumption may curb the recent advance in EUR/USD as it boosts the outlook for growth and inflation.

Signs of growing demand should keep the Federal Open Market Committee (FOMC) on course to further normalize monetary policy in 2018 as ‘members expected that economic conditions would evolve in a manner that would warrant further gradual increases in the federal funds rate,’ and a positive development may generate a bullish reaction in the greenback as it encourages to adopt a more hawkish tone at the next interest rate decision on March 21.

However, another below-forecast print may fuel the recent advance in EUR/USD as it curbs bets for four rate-hikes in 2018, and Chairman Jerome Powell and Co. may continue to project a neutral Fed Funds rate of 2.75% to 3.00% as the central bank struggles to achieve the 2% target for inflation.

IMPACT THAT THE U.S. RETAIL SALES REPORT HAS HAD ON EUR/USD DURING THE PREVIOUS RELEASE

Period

Data Released

Estimate

Actual

Pips Change

(1 Hour post event )

Pips Change

(End of Day post event)

JAN

2018

02/14/2018 13:30:00 GMT

0.2%

-0.3%

-29

+104

January 2018 U.S. Retail Sales

EUR/USD 5-Minute Chart

Household spending unexpectedly slipped 0.3% in January after holding flat during the last month of 2017, while a separate report showed the U.S. Consumer Price Index (CPI) holding steady at an annualized 2.1% during the same period amid forecasts for a 1.9% print. A deeper look at the report showed the weakness was led by a 1.3% decline in demand for motor vehicles/parts, with sales of building materials narrowing 2.4%, while clothing sales increased 1.2% during the same period.