TD Securities expects US retail sales to be flat in June at 0.0% month-on-month, below the 0.2% consensus. The bank forecasts the control group at 0.2% versus 0.5%, with gasoline sales weakening as prices fall and food services down 0.8%. Auto sales are projected to rise 3.0% m\/m, providing an offset to broader softness in spending and pointing to cooler consumer momentum with potential implications for the US Dollar.<\/p>\n
On inflation data, headline June PPI is cited at -0.3% against a 0.0% consensus, attributed to declines in food and energy. The firm has lifted its June core PCE estimate to 0.19% m\/m from 0.14% following CPI, while still characterising the combined PPI and CPI read-through as subdued for the month. TD Securities expects the Fed to keep rates on hold in July.<\/p>\n
We expect the US Dollar to face steady downward pressure in the coming weeks as retail growth completely stalls. Derivative traders should consider buying EUR\/USD call options or USD\/JPY put options to profit from this weakening trend. Historically, when retail sales miss estimates by this margin, the US Dollar Index (DXY) has dropped by roughly 1% to 1.5% in the following weeks.<\/p>\n
With headline consumer spending flat at 0.0% and producer prices dipping, the Federal Reserve is highly likely to keep interest rates steady before pivoting to cuts. We recommend buying fed funds futures or long-term Treasury futures to capture falling yields. Past data shows that similar economic cool-downs push the probability of an upcoming interest rate cut above 85%, which heavily boosts bond prices.<\/p>\n
We also suggest utilizing options spreads on retail and consumer discretionary exchange-traded funds (ETFs) to hedge against a broader consumer slowdown. Buying put options on retail-heavy indices can protect portfolios from a drop in corporate earnings. Meanwhile, lower yields could provide a tactical entry point for call options on interest-rate-sensitive sectors like utilities and real estate.<\/p>\n\n\n\n