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Looking to trade the news this week? Here’s why the upcoming U.S. retail sales release for January might be worth watching for quick pips!

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.

What happened in the previous release?

  • December headline retail sales rose 0.3% as expected
  • December core retail sales jumped by 0.7% vs. 0.5% forecast
  • November headline retail sales upgraded from 0.2% to 0.3%
  • November core retail sales downgraded from 0.1% to 0.0%

The December U.S. retail sales release painted a mixed picture of consumer spending. The month’s figures turned out somewhat better than expected, but the previous results had positive and negative revisions.

Looking closer at the components of the report reveals that all major categories, except for motor vehicle sales, saw gains. This was enough to bring the December retail sales figure up by 5.8% from the previous year.

Overlay of USD Pairs: 15-min Forex Charts
Overlay of USD Pairs: 15-min Forex Charts

The dollar had a bullish reaction to the report as it popped higher across the board during the actual release. It was able to hold on to these gains against most of its peers until the end of the day, except against the British pound.

What are traders expecting this time?

  • January headline retail sales to post 0.3% uptick
  • January core retail sales also to show a 0.3% gain

It looks like market watchers aren’t exactly expecting impressive consumer spending figures to start the year! Both headline and core versions of the report are projected to post 0.3% gains, slower than the earlier increases.

Also keep in mind that the core retail sales figure has been missing the mark in four out of the last five releases, so there could be  strong likelihood of another downside surprise this time.

If the January retail sales figures manage to beat expectations, it could support speculations that the U.S. economy could stay resilient despite global economic setbacks. This could mean another leg higher for the Greenback, which has already been enjoying a few rounds of risk-off flows these days.

Planning on trading the dollar?

A quick look at MarketMilk reveals that the dollar is mostly bullish against its peers but that it’s turning bearish against sterling and the franc.

USD Pairs Moving Averages from MarketMilk
USD Pairs Moving Averages from MarketMilk

If you’re hoping to catch the biggest moves among the dollar pairs, here’s a look at the average volatility in pips over the past week:

USD Pairs Volatility from MarketMilk
USD Pairs Volatility from MarketMilk

Whichever pair you choose, just don’t forget to practice proper risk management when trading the news. Good luck!