Partner Center Find a Broker

Sup, forex warriors!

Tomorrow at 1:30 pm GMT the world’s largest economy will print its retail sales reports for the month of November.

Here are points you need to know if you’re planning on trading the event:

But first, what the heck is a retail sales report?

Every month, the government sends out surveys to retailers to measure spending in department stores, electronic shops, car dealerships, gas stations, and restaurants.

It doesn’t factor in the service industry, which includes things like air travel, professional medical care, or how much you pay your stylist down the street to fix your afro.

The report features a “core” retail sales figure, which removes volatile items such as automobiles from the mix.

Traders pay attention to the release because consumer spending makes up 70% of the U.S. GDP, one-third of which comes from retail activity. BFD, don’t you think?

What happened in last month’s release?

  • Headline retail sales up by 0.3% vs. 0.1% expected, -0.3% in September
  • Core retail sales up by 0.2% vs. 0.3% expected, -0.1% in September

Retail activity was a mixed bag of nuts, with higher fuel prices inspiring a recovery in headline retail sales, while core retail trading missed market expectations.

While the dollar showed minimal reaction to the release, weak capacity utilization and business inventories data printed during the same trading session weighed on the dollar.

It also didn’t help dollar bulls that markets were optimistic over a “phase one” deal with China for most of that week, and there was appetite for higher-yielding bets.

USD 15-Minute Forex Chart
USD 15-Minute Forex Chart

The dollar ended the day higher against JPY but lower against the rest of its major counterparts.

What are traders expecting this time?

  • Headline retail sales could rise by 0.5% in November
  • Core retail sales is expected to print at 0.5% after a 0.2% gain in October

Seems like recent improvements in labor market have raised investors’ expectations. They see both headline and core retail sales gaining by 0.5% in November!

But unless we see significantly strong numbers, it’s unlikely that this week’s numbers will affect the Fed’s near-term policies.

In yesterday’s FOMC event we learned that members aren’t seeing any interest rate changes until the end of 2020. See, Chairman Powell and his team believe that their policies “remain appropriate” until something “materially” changes their outlook.

For now, they believe that unemployment can remain low without putting too much upward pressure on inflation (and interest rates). In fact, the FOMC gang will need to see “persistent and significant” inflation (read: consumer spending) before they raise rates again!

If tomorrow’s retail numbers improve significantly more than markets are expecting, then we could see the dollar rally against its counterparts.

If last month’s strong numbers prove to be short-lived, however, then dollar bears could attack and drag the dollar lower across the board.

Planning on trading the dollar?

A quick look at MarketMilk shows us that both EUR/USD and AUD/USD are “bearish but weakening” on the long-term SMAs and “bullish” using shorter-term SMAs. Keep an eye on both pairs for retracement or reversal opportunities!

If you’d rather trade the most volatile dollar pair out there, then here’s a list of USD’s volatility against its major counterparts in the last 30 days!