Morning Brief – Traders Await US Retail Sales

Traders are awaiting the release of the US Retail Sales later today, as it remains one of the last big economic releases that the FED will pay great attention to.

Last month Retail sales in the US unexpectedly fell 0.3% mom in May of 2022, the first decline so far this year and compared to market forecasts of a 0.2% rise.

The report followed a downward revised 0.7% increase in April, as high inflation, gasoline prices, and borrowing costs hurt spending on non-essential goods.

Inside last month’s report, it showed that Auto sales recorded the biggest decline -4% and sales also a big drop in electronics & appliance stores to -1.3%.

This is the type of thing that the FED is going to watch closely in terms of being conscious that they could be hiking rates too quickly. However, the result 40-year high in CPI is a big counterbalance.

Retail Sales are known to be very volatile, so today’s print would be having to be something special in order to make the market really start to get the notion that the FED may stop and think about hiking too fast.

Inflation metrics inside the report will also be of great interest. Last month retail sales rose at gasoline stations by +4%, amid a surge in gas prices, food, and beverage stores.

Results at or better than the 0.8% headline forecast will support Treasury yields. The dollar may fade as the immediate fears prompting the safety trade diminish. Equities will find relief, but the overall negative economic atmosphere will not change.

My logic is that if retail sales figures are much worse than forecast or heavily negative we will probably start to see US Treasury yields will fall and US stock will assume a recession has already started and continue to decline.

On the other hand, the US dollar is likely to rise as the safety trade and fears of global recession dominate markets. A bad number will probably hurt energy prices.

It should also be noted that the NYC Manufacturing survey is due to be released before the retail sales number. Markets are expecting a -2-headline print.