Retail sales data for February which should shed some light on the state of the US economy will be in today’s focus.
Economists expect consumer spending to rebound sharply after plunging in January.
Even though spending is forecast to slow this year, January's decline slightly exaggerates the short-term consumption slump. Households continue to benefit from a real income tailwind that should support spending in the near term. Thus, spending is expected to rebound in February, and retail sales should grow by 0.8%. This is how Wells Fargo experts assessed the situation.
Consumer strength has been the foundation of overall economic growth and has proven to be far more resilient than most politicians and economists had predicted.
However, persistent inflation could be damaging and put the outlook for future economic growth in danger, making EURUSD weaker.
The arguments in favor of a gradual but sustained deceleration in consumer spending from the high rates of 2023 are quite solid. Most households have exhausted excess savings accumulated during the pandemic, while borrowing costs have soared, and last year's drop in housing sales has reduced demand for housing-related retail goods such as furniture and appliances, according to Pantheon Macro Economics' assessment.
Investors will also keep an eye on today's publication of producer prices for February. An unexpected rise, as in January, may further complicate the inflation picture for the Fed and set conditions for EURUSD to decline.
This report is the last of the major economic data to be released before next week's US central bank meeting.
The overall recommendation is to sell EURUSD. Profits should be taken at the level of 1.0880.
A Stop-loss could be set at the level of 1.1010.
This content is for informational purposes only and is not intended to be investing advice.
