Retail sales miss but prior revised higher; USD set for large weekly loss

Summary:

• US retail sales M/M: +0.1% vs 0.4% exp; core reading: +0.3% vs +0.5% exp

• Prior readings for both revised higher though

• USD mixed after a week of declines

The biggest economic release of the day has, on the face of it, come in as a further negative for the US dollar but when the revisions to the prior releases are taken into account the data is actually not that bad. The advance retail sales for August fell more than expected to +0.1% M/M, with the consensus forecast calling for a print of +0.4%. This miss is seen in a different light however when the revision to the previous release is taken into account, with the July figures now standing at +0.7% from +0.5% beforehand. It was a similar story as far as the core reading or ex-auto is concerned with with the M/M falling to +0.3% compared to +0.5% but the previous was revised firmly higher by 0.3% to 0.9%.

This variance caused by the month on month nature of the releases can be negated to some extent by looking at year on year data, although this longer term approach can have the downside of taking longer to reflect shifts. Viewing a chart of both the headline and core readings in year on year terms shows that the longer term picture appears to remain strong as far as consumer spending is concerned in the world’s largest economy.

If the month on month variations are smoothed out by looking at year on year data the bigger picture remains pretty positive as far as US retail sales are concerned. Source: XTB Macrobond

Seeing as it’s Friday afternoon, now is a good time to look back at the week and see what the past few sessions have shown. The US dollar is mixed on the day following the release but looking at the weekly heatmap it is clear it’s been a bad week for the greenback with declines seen against all of its peers barring the Brazilian real and the Japanese Yen. The biggest gainers come predominantly from the emerging markets space with the Turkish Lira the standout performer but also the Mexican Peso and South African Rand have made noteworthy moves higher.

The USD looks set to end the week with losses against the vast majority of other currencies with only a couple performing worse than the buck. Source: xStation     

The USD index is on track to close at its lowest level in 2 months with the market pulling back towards the 94 handle. The size of the weekly decline is close to being the largest seen so far this year in nominal terms. Source: xStation