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Tomorrow at 1:30 pm GMT, Uncle Sam will print its retail sales report for the month of December. Think you’re ready to trade the event? Here are a few points you should know first.

What happened last time?

  • Headline reading: +0.2% vs. +0.1% expected, +1.1% in October
  • Core reading: +0.2% as expected, 1.0% in October

Retail spending inched 0.2% higher in November after seeing an upwardly revised 1.1% growth in October. Excluding automobiles, gasoline, building materials and food services, spending had risen by 0.9% for the month. That’s more than the 0.4% uptick that many had expected!

Turns out, Americans took advantage of Black Friday discounts and lower fuel prices and bought furniture, electronics, and other goods.

The better-than-expected report was enough to offset slowdown concerns stirred by a weak manufacturing output printed a few days back. Unfortunately for the dollar, the report was also released on the last trading day of the week before the Fed made its last decision for the year.

If you recall, the Fed was widely expected to raise its rates at the time. But due to a combo of pressure from President Trump, weak domestic data, and signs of slowdown in other major economies, more than a few analysts had started to price in a less hawkish Fed in 2019.

The dollar ended up giving back a chunk of its intraday gains before the U.S. session close.

USD 15-Minute Forex Charts
USD 15-Minute Forex Charts

What are traders expecting this time?

  • Headline reading: +0.1% expected vs. +0.2% previous
  • Core reading: +0.1% expected vs. +0.2% previous

Remember that the U.S. Commerce Department wasn’t fully funded during the partial government shutdown in January, so we’re only seeing December’s numbers this week.

And as you can see, traders expect a bit of pullback from the rates of both the headline and core retail sales in December. Heck, the closely-watched “retail control” group, which is used in the GDP computations, is seen at 0.4%. That’s a step down from November’s 0.9% growth!

In any case, do leading indicators support the analysts’ lack of enthusiasm?

Total vehicle sales came in at 17.55 in December, which is slightly higher than the 17.49M figure seen in November.

ISM’s non-manufacturing PMI also showed optimism, as the survey mentioned “higher retail activity” and cited retail trade as one of the 16 industries reporting growth for the month.

And then there’s December’s jobs numbers, which showed the retail trade industry adding a net of 24,000 jobs for the month.

Markit’s manufacturing PMI was the only party-pooper, as it reported that the degree of positive sentiment among private sector firms had “dipped markedly,” and that new order growth had softened in December.

Will this week’s release influence USD?

Based on the leading indicators above, it looks like there’s a chance that we’ll see upside surprises in this week’s retail sales reports.

If this week’s retail sales numbers come in much better than markets had expected, then concerns over Uncle Sam’s growth will likely ease a bit. But if they show weak figures in December, then they will support the Fed’s less hawkish bias in 2019 and inspire talks of some slowdown in Uncle Sam’s growth.

Does this mean that you should set up your swing dollar trades ASAP? Not necessarily.

Remember that December’s positive release only influenced the dollar’s price action for a couple of hours. Because of more dominant market themes, the Greenback ended up losing its post-report gains by the end of the day.

This time around, it’s updates over the U.S.-China trade negotiations that we need to worry about. Word around is that the Donald is open to letting the March 1 trade truce deadline “slide for a while” if he sees that the U.S. and Chinese reps are close to making a deal.

Meanwhile, we’re still waiting to see if Trump signs the tentative federal spending deal that was negotiated between both sides of the aisle earlier this week. The Donald has shared that he’s “not happy” with the deal that omits the $5.7B wall funding that he demands, but that he also doesn’t think we’re going to see another partial shutdown by the end of the week.

For now, you could look into setting up your news trading plans and trade the dollar’s direct correlation with how good the retail sales numbers are. Just keep in mind that the investors’ initial reaction might not last especially if there are stronger economic themes at play.