USD Hopes to Survive Friday 13 Retail Sales Data

Consumer Spending Has Been Weak But Forecast Calls For Growth

The U.S. dollar is losing momentum ahead of the release of retail sales data on Friday, May 13 at 8:30 am EDT. The economic indicator has more than once killed greenback rallies in the past. The total value of retail sales in the U.S. is expected to remain negative at -0.3 percent for the headline number, but removing the volatile auto component has the market forecasting the core indicator to rise by 0.6 to 0.8 percent in April.

The USD rally survived a disappointing U.S. non farm payrolls (NFP) last Friday. The U.S. only added 160,000 jobs when more than 200,000 where expected. The miss only slowed down the buck as it was known ahead of time that even if it had over performed the U.S. Federal Reserve would not change its mind about June. The softer jobs number was slightly offset by a rise in hourly earnings which the central bank is following more closely.

The American consumer has proven difficult to forecast given that with a lower cost of gasoline and steady employment gains they were expected to spend more while it appears that savings has been the preferred choice. Consumer sentiment paradoxically has been positive, yet has not translated into actual spending as Friday’s retail sales and University of Michigan Consumer Sentiment survey are forecasted to show.

The USD has been mixed against majors in the last 24 hours. It has lost ground against commodity currencies as the price of oil has surged by 1.59 percent to trade at $46.56. The CAD has benefited from the rise with the USD/CAD losing 0.207 percent, while the Aussie and Kiwi remain under pressure at -0.75 percent and -0.203 percent respectively. The EUR has retraced versus the USD by 0.45 percent and is now trading at 1.1378 awaiting the release of retail sales data. The monetary divergence boost that put the buck higher had mostly dissipated after a rather dovish March FOMC. A positive retail sales report could reignite some anticipation for the June meeting.

Next week’s release of the April’s FOMC minutes are one of the highlights in a month with low central bank participation. June was a prime candidate to see a rate hike, more from the logistical side as the monetary policy meeting features a press conference which is favoured by Fed members to better communicate such a market moving event. If June is passed over, September and December remain. September carries its own complications given that this is an election year in the U.S. and the Fed might recluse itself at a time when any action would be interpreted as political bias. That leaves December as the last FOMC standing, but would mean the Fed waited a year since its last rate hike, and that is even assuming that the U.S. economy would be ready for one.

USD events to watch tomorrow:

Friday, May 13
2:00 am EUR German Prelim GDP q/q
8:30 am USD Core Retail Sales m/m
8:30 am USD PPI m/m
8:30 am USD Retail Sales m/m
10:00am USD Prelim UoM Consumer Sentiment

*All times EDT
For a complete list of scheduled events in the forex market visit the MarketPulse Economic Calendar

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza