• US retail sales m/m unexpectedly turn negative for August
  • 6 of the last 7 retail sales releases have missed forecasts
  • USD coming back under pressure and lower on the day

US consumer spending took an unexpected hit last month, with the retail sales data for August disappointing. A month on month decline of 0.2% was well below the 0.5% increase that was forecast and reveals a slip back into negative territory after the prior rise of 0.6%. What is more, this is now the 6th time in in the last 7 releases that retail sales figures have missed forecasts and this run of disappointments looks set to continue.

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 US retail sales fell back lower in August and the rise seen since the start of 2016 looks like it could be under threat. Source: xStation 

The core component of retail sales also came in below forecast, and whilst a print of +0.2% means it remains in positive territory it is not the positive number that USD bulls were hoping for. The recent lack of strength in retail sales is somewhat surprising, especially when considered against consumer sentiment which has enjoyed a good run of improvement sine 2010.   

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 Retail sales continue to lag the consumer sentiment in the US. Source: xStation

The market reaction in the US dollar to the release has been negative initially, with the USDJPY falling back lower after earlier trading above the 111 handle at a 7-week high.

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 The USDJPY has fallen back below 111 after the retail sales release. Source: xStation

Longer term the news has seen price dip back below 110.75 which could be a key line in the sand going forward. If price can close above this level this evening then the outlook becomes more favourable and an extension to the upside may occur. however a failure to end the day above 110.75 would keep the prior range in tact and could see some weakness ahead.  

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 The 110.75 level could be key to watch going forward, with a close above there potentially signalling a breakout higher. Source: xStation

Keep an eye out for the latest University of Michigan consumer sentiment data which is set to be released at 3pm and may either support or reject the weakness shown in retail sales.