Mitrade Insights is dedicated to providing investors with rich, timely and most valuable financial information to help investors grasp the market situation and find timely trading opportunities.
    2021
    Best News & Analysis Provider
    FxDailyInfo
    2022
    Best Forex Educational Resources Global
    International Business Magazine

    How will the US July retail sales impact the stock market and the US dollar?

    Mitrade
    Updated August 18, 2023 02:26

    Main content:

    On August 15th, the United States will release retail sales data for July. The market expects a month-on-month increase of 0.4% in retail sales, while the control group rate used to calculate GDP is expected to be 0.5%. If it meets or exceeds expectations, it will be positive for US stocks and the US dollar. Conversely, if the data falls below expectations, it will be negative for US stocks and the US dollar.



    1.What are the market expectations for the upcoming release of July retail sales data in the United States?

    On August 15th, the United States will release retail sales data for July. Market expectations suggest that the month-on-month retail sales rate for July, excluding automobiles, is expected to rise from 0.2% in June to 0.4%. Additionally, the control group retail sales used in GDP calculations (excluding automobiles, gasoline, building materials, and food services) is expected to be 0.5%, compared to 0.6% in June.


    【Source:Trading economics】


    However, different institutions have varying expectations regarding this matter. We have compiled the estimates from all parties as follows:


    Institution

    July retail sales growth rate

    Control group retail sales monthly rate

    Citibank

    0.4%

    0.5%

    Bank of Wealth

    0.3%

    /

    Deutsche Bank

    0.3%

    0.2%

    Canadian Imperial Bank of Commerce

    0.2%

    0.4%

    Credit Suisse

    0.4%

    /


    2.What impact does the July retail sales data have on US stocks and the US dollar?

    As consumption accounts for nearly 70% of the US GDP, with retail sales representing close to 40% of consumer spending, observing US retail sales data can provide insight into the state of the consumer market and overall economic health of the United States.


    US shares

    In general, strong retail sales data indicates a healthy US economy, which is positive for the stock market. Conversely, weak retail sales data suggests a sluggish consumer market and a weaker US economy, which is negative for the stock market.


    However, due to the ongoing process of the Federal Reserve raising interest rates, the impact of retail sales data has become more complex. For example, if retail sales are slightly lower than expected, signaling a slowdown in demand, it can be beneficial for decreasing inflation, thereby reducing the probability of a Federal Reserve interest rate hike. This, in turn, becomes a positive factor for the stock market.


    Therefore, it is better to use retail sales data as an observation signal for the retail sales industry rather than as a judgment of the overall impact on the US stock market.


    Since the end of May, the strong performance of retail sales has supported the optimistic view that Americans are still willing to spend, with the S&P Retail Select Industry Index rising by 16%, more than twice the 6.8% increase of the S&P 500 Index.


    【Source:TradingView】

    Since then, Home Depot has surged over 15%, Walmart's stock price has increased by 9%, and other retail stocks have also performed well. If this strong retail sales data is sustained, it will further benefit retail stocks.


    Dollar

    If retail sales data meets or exceeds expectations, it will be positive for the US dollar; conversely, if retail data falls short of expectations, it will weigh on the US dollar.


    Special attention should be paid to the control group retail sales growth rate. Last month, US retail sales increased by only 0.2% compared to the previous month, significantly below expectations. However, the key indicator, control group retail sales (excluding automobiles, gasoline, building materials, and food services) accelerated to a 0.6% monthly growth rate in June, indicating strong consumer demand.


    After the data was released, the US dollar index (DXY) initially declined over 20 points, but later rebounded by nearly 40 points, eventually closing slightly higher.


    【Source:Wall Street Journal】

    Therefore, apart from the monthly retail sales rate, attention should also be paid to other sub-item data.


    Technical analysis

    From a technical perspective, the US Dollar Index has reached the vicinity of its 200-day moving average, encountering strong resistance on the upside. If it manages to break through the key level of 103.5, further upward movement is possible. Conversely, it may experience a retracement if it oscillates downward.


    DXY_2023-08-15_16-21-19

    【Source:TradingView】



    * The content presented above, whether from a third party or not, is considered as general advice only.  This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.

    Do you find this article useful?
    Related Articles
    placeholder
    EURUSD Long-term Forecast: Can ECB Hawks Overcome the Dollar Bullishness? As one of the most traded currency pair in the forex markets, the price of EURUSD affects many traders. Check out our EURUSD long-term forecast for more information.
    Author  Mitrade
    As one of the most traded currency pair in the forex markets, the price of EURUSD affects many traders. Check out our EURUSD long-term forecast for more information.
    placeholder
    AUD/USD holds above 0.6500, eyes on RBA MinutesFriday's preliminary reading of the US S&P Global Manufacturing PMI for November could provide direction for AUD/USD.
    Author  FXStreet
    Friday's preliminary reading of the US S&P Global Manufacturing PMI for November could provide direction for AUD/USD.
    placeholder
    EUR/USD Trying to Hold Above 1.0800, Sees Limited Recovery After Monday BackslideThe EUR/USD is down half a percent on Monday after an early decline. 1.0800 is the level for bears to beat ahead of Friday’s US NFP.
    Author  FXStreet
    The EUR/USD is down half a percent on Monday after an early decline. 1.0800 is the level for bears to beat ahead of Friday’s US NFP.
    placeholder
    AUD/USD drops below 0.6600 following RBA rate decision The Reserve Bank of Australia decided to keep interest rates unchanged at 4.35%, in line with consensus market expectations. Additionally, investors will focus on the U.S. ISM Services Purchasing Managers' Index due later on Tuesday.
    Author  FXStreet
    The Reserve Bank of Australia decided to keep interest rates unchanged at 4.35%, in line with consensus market expectations. Additionally, investors will focus on the U.S. ISM Services Purchasing Managers' Index due later on Tuesday.
    placeholder
    What impact will the US July CPI have on US stocks and the dollar?This Thursday, the United States will release the CPI data for July. Market expectations suggest that the year-on-year CPI for July will rise from the previous month's 3% to 3.3%, while the core CPI is projected to increase by 4.8% year-on-year, remaining unchanged from the previous reading. If the data exceeds expectations, it may exert downward pressure on US stocks and benefit the US dollar.
    Author  Mitrade
    This Thursday, the United States will release the CPI data for July. Market expectations suggest that the year-on-year CPI for July will rise from the previous month's 3% to 3.3%, while the core CPI is projected to increase by 4.8% year-on-year, remaining unchanged from the previous reading. If the data exceeds expectations, it may exert downward pressure on US stocks and benefit the US dollar.