Will Stimulus See a Surge in Retail Sales?

Following a lack-luster response to the March CPI release earlier in the week, USD bulls are now looking to today’s March Retail Sales release. The headline reading is expected to print 5.8%, up from the prior month’s -3% reading. Core Retail Sales are also forecast to print 5.1%, up from the prior month’s -2.7%. Given the response to inflation, it is clear the market will need to see a strong beat to drive USD upside.

So, while the market is expecting a positive print anyway, the interesting thing will be the extent to which the March stimulus cheques have impacted retail sales. With this in mind, there is room for a firm upside surprise today.

The $600 cheques sent out in January saw Retail Sales rise by 7.6%. However, it very much depends on how much of the stimulus was spent immediately, in March, and how much was saved.One good indicator of spending is March auto sales which jumped 13.3% on the month. The US also saw better weather in March which could have also contributed to higher spending.

Where to Trade Retail Sales?

GBPUSD continues to hover just above the 1.3676 level support following the break (and failed retest) of the rising trend line from 2020 lows. If USD rallies on the back of today’s release, a break of the 1.3676 level should open the way for a run down to the 1.3461 level next. Concerns over slowing vaccination rates, the risk of re-opening and the identification of the South African variant in London have all raised a question over GBP this month.

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