US RETAIL SALES PREVIEW: ROBUST CONSUMER SPENDING ACTIVITY WILL ADD UPSIDE MOMENTUM TO USD – BBH

The US Dollar (USD) is staging a modest recovery ahead of the US February Retail Sales print. Economists at BBH analyze how the data could impact the USD.

Soft spending reading can trigger another downside correction in USD

Market participants expect Retail Sales to rebound by 0.8% MoM in February after unexpectedly falling 0.8% MoM in January. Importantly, the Control Group Retail Sales (which exclude cars, gas, food services, and building materials and feed into the GDP calculation) is forecast to rise by 0.4% in February following a 0.4% decline the previous month.

Robust US consumer spending activity will further curtail money market expectations of Fed funds rate cuts and add upside momentum to USD. In contrast, any evidence that spending is buckling under the weight of higher interest rates and depleting excess savings can trigger another downside correction in USD.