AMrch 2024 retail sales figures will be released on Monday at 1230 GMT (08:30 ET).
The Fed will be focused on assessing the health of consumers and, by extension, the health of the U.S. economy. If it is stronger than expected, there will be a stronger case for postponing the rate cut, and vice versa if it is weaker than expected. It will also affect Japan's Ministry of Finance (and the Bank of Japan). If selling unexpectedly extends the upside, it would stimulate USD/JPY buying and delay any possible intervention to support the yen (on the margin).
Consensus forecasts are shown in the table below. This snapshot is from the ForexLive Economic Data Calendar. Please visit here.
Retail sales month-on-month:
Month-over-month retail sales excluding automobiles:
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Why is knowledge of this range important?
Data results that deviate from the market's low or high expectations tend to move the market more significantly for several reasons.
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Surprise factor: Markets often price expectations based on forecasts and previous trends. If the data deviates significantly from these expectations, unexpected effects will occur. This can lead to a rapid revaluation of assets as investors and traders revalue their positions based on new information.
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Psychological influences: Investors and traders are influenced by psychological factors. Extreme data points can evoke strong emotional reactions and lead to overreactions in the market. This can potentially magnify market movements, especially in the short term.
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Reassess risk: Unexpected data can lead to reassessment of risk. If the data is significantly lower or higher than expected, the perceived risk of a particular investment may change. For example, if economic indicators outperform expectations, the perceived risk of investing in stocks can be reduced, leading to market gains.
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Automated trading triggers: In today's markets, the majority of trading is done by algorithms. These automated systems often have preset conditions and thresholds that, if triggered by unexpected data, can lead to large-scale buys and sells.
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Implications for monetary and fiscal policy: Data that deviate significantly from expectations can influence central bank and government policy. For example, today's weaker-than-expected retail sales figures have led to speculation that a Federal Open Market Committee (FOMC) rate cut will be closer and larger. It will increase. Stronger (i.e. higher) sales reports would reduce such expectations.
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Liquidity and Market Depth: In some cases, extreme data points can impact market liquidity. If the data is sufficiently unexpected, it can create a temporary imbalance between buyers and sellers, causing large market movements until a new equilibrium is found.
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Chain Reactions and Correlation: Financial markets are interconnected. If unexpected data causes a large movement in one market or asset class, it can cause correlated movements in other markets, amplifying the impact on the overall market.