End of Season Sale!

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Shopaholics unite! Did you shop ’til you drop last season? It’s time to check out the upcoming retail sales reports to see the status report on consumer spending. As we all know, consumer spending takes up a sizeable chunk of the GDP so these retail sales figures have a huge say on economic growth. New Zealand, United States, and United Kingdom, how you doin’?

New Zealand

First up, New Zealand is set to release its retail sales report today at 10:45 pm GMT.

New Zealand enjoyed a 0.9% jump in retail sales last June, which was almost twice as much as the forecast and the previous month’s reading. Even better, core retail sales shot up by 1.5% then. Naturally, this boosted the Kiwi’s spirits, pushing NZDUSD to rally by almost a hundred pips during the release.

This time around, New Zealand is expected to report that retail sales stayed flat in July. Meanwhile, core retail sales are eyeing a mere 0.1% uptick. Of course there’s always the chance that the actual figure could come in much better than expected again, but a reading that’s in the red would probably crush the Kiwi‘s hopes and halt NZDUSD’s current uptrend.

United States

On Tuesday at 12:30 pm GMT, we have the US retail sales on tap.

The US economy was able to give markets a breather when it showed that consumer spending finally picked up in July after three straight months of decline. Woohoo! The Census Bureau reported that the headline figure for retail sales increased by 0.4% and erased its -0.3% reading in June. Excluding automobile purchases, the report showed that consumer spending grew by 0.2%.

Although the actual headline and core retail sales figures fell short by 0.1% of their forecasts, the dollar didn’t see much action on the charts as USDJPY and EURUSD only dipped a little after the release and then pop back up again. Traders probably thought, “Eh, it could’ve been so much worse.”

Analysts are expecting to see that American consumers continued their shopaholic habits in August, with the consensus up at 0.3%. They’re optimistic that retailers were able to give fatter discounts to shoppers thanks to the seventeen tax-free holidays granted by the government. In other words, there were seventeen awesome days that businesses didn’t get tax reductions from their revenues. Pretty sweet, eh?

So what does this mean for the dollar? Well, a higher-than-expected figure may probably be the springboard that the bulls need to launch USDJPY above the 85.00 handle. Boo yeah! But, if the actual numbers disappoint, we may just see the pair chill around 84.00 or worse, it may tumble back to its 15-year low at 83.34. Yikes!

Against the euro and the pound, the dollar may take a hit if the figures impress traders as they could flick the risk appetite switch back on. However, lower-than-expected numbers may cause safe haven currencies, including the dollar, to rally as this would spark worries about a double-dip recession for the world’s largest national economy.

United Kingdom

And finally, UK will release its retail sales report on Thursday at 8:30 am GMT.
In the previous report, retail sales climbed by a whopping 1.1%, which was than twice the initial consensus of 0.4%. Needless to say, the surprise results led to a massive 150-pip rally in Cable.

One thing you should remember about Cable is that it is highly sensitive to risk. When investors are feeling warm and fuzzy inside about the economy, it gets bought up like a brand new Expert Advisor. (Not really, but you get the picture, right?) Conversely, when the economic outlook isn’t looking too bright, Cable immediately gets sold off.

This phenomenon could be at work again in the upcoming release. This means that we could see Cable rally if the figure is higher than expected and fall if not.

Final Notes:

Always remember that it is important to see not only whether the report has missed consensus, but also to what extent. The speed and direction (velocity and trajectory for the nerds, represent!) will highly depend on how far the actual figure is from forecast!