Sales recovery is expected to moderate in July from historic gains in May and June. The US Dollar, which has stabilized after falling for three weeks, is likely to receive a boost if sales beat expectations, Joseph Trevisani, an analyst at FXStreet, reports.
Key quotes
“Retail sales are forecast to rise 1.9% in July following the combined 25.7% gain in June (7.5%) and May (18.2%). Purchases in the control group category, which is the Bureau of Economic Analysis’ consumption component, are forecast to rise 0.8% in July after June’s 5.6% and May’s 10.1% increases. Sales excluding automobiles are projected to climb 1.3% in July following gains of 7.3% in June and 12.1% in May.”
“Employment is the most important factor in consumption. If US households are reasonably confident of maintaining their income they have always been reliable consumers. The only caveat to this consumption picture is the drop in consumer sentiment in July. It is possible that, given the actual job and inflation numbers, the decline was more a product of the fear of the second wave cases than a measure of genuine economic impact.”
“The sell-off in the US dollar over the past month was predicated on the second wave Covid-19 impact on the economy. If retail sales do not in fact drop as anticipated, the currency will have another data point for a stronger USD.”
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