US retail sales are the most important macroeconomic reading scheduled for today. One can see that American consumers may have gotten a bit out of breath as consensus does not look as good as in previous months. Of course, the previous data was potentially influenced by the distribution of one-off checks, the increasing base effect and uncertainty about prices. It can be seen that Americans react negatively to excessive increases in prices of, for example, real estate or cars, reducing their purchase plans.
Bloomberg's consensus assumes a decline in retail sales by 0.5% MoM for May, but at the same time an increase by 0.6% MoM for core sales excluding cars. Double base sales, i.e. without cars and fuels, indicate a potential growth of 1.0%. However, not everyone shares this consensus view. Bofa, whose retail model based on credit card spending shows much worse data. It expects a decline in overall sales at 1.4% MoM and sales excluding cars at 1.0% MoM.
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Create account Try a demo Download mobile app Download mobile appScotiabank, on the other hand, says that poor sales, especially of cars, are not necessarily caused by high prices, but simply by insufficient supply. The shortage of chips necessary for car production has also resulted in the limited availability of cars. Scotiabank points to a decline in car sales at the level of 8.2% MoM and points that car prices rose in May by 1.6% MoM.
BofA expectations on today's report. Source: BofA
But how will the market react? The Fed may accept worse data with relief. Moreover, worse data may not necessarily cause the dollar to fall, as more and more institutions expect such a reading. At the same time, worse data should give more comfort to the Fed, so theoretically, we can count on a further decline in yields. However, if today's data does not significantly exceed the market consensus, they should not affect the current Fed's bias.
As one can see, EURUSD is well-priced in the short term, looking at TNOTE's performance. Worse data should lead to increases in TNOTE, which may lead to maintaining the position on the EURUSD. On the other hand, the pair is trading near a very important support, the break of which could push the pair towards 1.20 level. Source: xStation5
