February Retail Sales In US Dollar Terms Need To Bounce Back
DXY looks biased more towards 103.20/30 than 104.00/10. Beyond all the uncertainty related to the US tariffs that have been going up and down this year, one core theme weighing on US interest rates and equities is the fear of a slowing US consumer. Consumption has been the main driver of US growth since the pandemic, and concerns are growing that consumers are ready to cut back on spending and increase savings as they await clarity on the impact we could see from the new administration’s plans for the economy and jobs outlook. Consensus is looking for a 0.6% month-on-month recovery in the reading after a 0.9% decline last month. Any downside surprise today could risk weakening equities, lowering US interest rates and weakening the US Dollar (USD), notes ING FX analyst Chris Turner.
"The big question for investors now is how hard Washington will push its reset agenda. Equities are vulnerable to comments that the administration is prepared to accept a slowdown – or even a recession – as it embarks on a complete reset of global trade and security. Given the prospect of sizable tariffs being imposed early next month on Europe and Asia, we suspect risk assets will remain fragile in the weeks ahead."
"Back to the major events this week, Wednesday brings the FOMC meeting and a fresh set of Federal Reserve forecasts. No major changes are expected in terms of policy rates, forecasts or communication. However, we see these events as a slight upside risk to the dollar, as the Fed has only kept two 25bp cuts this year (currently priced at 61bp) and Chairman Jerome Powell has a good track record of saying the right thing to calm equity markets."
"The other focus is geopolitics, with US President Donald Trump and Russian President Vladimir Putin due to have a phone call on Tuesday. Any progress here could be good news for the European currency and bad news for the DXY. US stock futures are currently trading down 0.6% although Asian stocks are showing modest gains on the back of China's consumer package. Unless we get some very strong US retail sales numbers today, a heavy US stock market looks set to keep US interest rates and the dollar weak. The DXY looks more likely to lean towards 103.20/30 than 104.00/10."
Source: FXStreet
