Today's core retail print came in higher than expected – 0.6% m/m vs 0.4% m/m. Moreover, the previous core number of 1.4% m/m was revised significantly upwards to 2.1% m/m. These are strong numbers that the Fed will certainly take notice of in its effort to quell inflation. This is because the Fed's rate increases influence the demand side of the economy. Consider the US Redbook index, which is a sales-weighted index of large US general merchandise retailers:
We note that the series has been coming down since the beginning of 2022 (blue dashed vertical). Nevertheless, it is significantly higher than pre-pandemic levels. Moreover, the momentum of the index has been rising since March (red dashed vertical – lower stochastic indicator), which suggests to us that the Fed's current hiking cycle is set to continue unhindered.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.