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US Dollar Forecast: USD May Rise on Retail Sales Data

US Dollar Forecast: USD May Rise on Retail Sales Data

Dimitri Zabelin, Analyst
What's on this page

US Dollar Outlook, US Retail Sales, Fed Monetary Policy, Jerome Powell – Talking Points

  • US Dollar may extend rally if retail sales show healthy growth
  • Strong report would give Fed more reason to keep rates steady
  • US-China trade war negotiations could undermine optimism

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The US Dollar may rise if advanced month-over-month retail sales figures show spending picked up in October. A better-than-expected print could fuel a US Dollar rally and punish gold prices if leads market to speculate it will reinforce the Fed’s position to hold rates. Conversely, a weaker reading could have the reverse effect and send XAU/USD higher at the expense of USD and front-end government bond yields.

Will There be a Recession in the US Economy?

At least for now, the answer appears to be “no”. That is something one might surmise after hearing Fed Chairman Jerome Powell’s two consecutive Congressional testimonies where he highlighted downside risks but stressed the strength of the US economy. He added that monetary policy is supporting consumer spending which accounts for well over 70 percent of the largest economy in the world.

Having retail sales data outperform forecasts – or at least fall in line with them – would lend credence to Mr. Powell’s claim that economic activity remains strong. In this scenario, the US Dollar along with equities may rise since it both would cool Fed rate cut bets while also calming investor’s angst about the prospect of a recession. But are the fundamental risks truly reduced or are they being veiled by ethereal market optimism?

US-China trade talks remain shaky despite persistent comments from Washington officials who insist talks are going well and are constructive. The capacity for these hopeful words to elicit a strong bullish bias has lost its potency as the repetition of these comments does more to illustrate an apparent lack of progress than meaningful change. Were it the latter, we would have already seen something in writing.

Fed Chairman Jerome Powell Says US-China Trade War Has Contributed to Industrial Recession

Chart showing US Manufacturing PMI


--- Written by Dimitri Zabelin, Jr Currency Analyst for

To contact Dimitri, use the comments section below or @ZabelinDimitri on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.