Insights 
VT 
Retail Sales in the US dropped by 0.9% in May, reaching $715.4 billion, surpassing the expected decline of 0.7%. This fall follows a revised decrease of 0.1% in April, while on a yearly basis, Retail Sales increased by 3.3%, down from 5% in April.
Sales from March to May 2025 rose by 4.5% compared to the same period last year, with retail trade sales down 0.9% from April but up 3.0% yearly. The Import Price Index remained stable in May, while the Export Price Index fell 0.9%.
Us Dollar’s Performance
The US Dollar’s performance remained relatively stable, with the USD Index slightly down by 0.04% at 98.10. The April Retail Sales reading was corrected to -0.1% from -1.5%, clarifying the recent retail trends.
The sharper-than-expected drop in May’s US Retail Sales—down 0.9% instead of 0.7%—suggests a temporary weakening in consumer demand, even though annual figures still show moderate growth. Revisions to the April reading, which was adjusted from a steeper -1.5% to -0.1%, mean that the original impression of a heavy pullback in spending was overstated. This softer monthly data, paired with an annual growth of 3.3%, continuing downward from April’s 5%, reveals a loss of steam in the broader pace of consumption.
From March through May, consumption still showed a 4.5% year-on-year lift, though that’s increasingly front-loaded by March strength. Notably, May’s decline eroded April’s flatness, with retail trade sales dragging on the headline figures. The retreat in the Export Price Index, losing 0.9%, hints at waning international demand or commodity effects, while unchanged import prices confirm that cost pressures from abroad remain contained—for now.
Currency markets reacted with minimal movement. The Dollar Index barely moved, softening just 0.04%, which implies pricing expectations stayed largely intact after the release. Still, the revisions to April’s data helped clear some confusion, offering a better sense of direction regarding how much consumer resilience remains.
Market Reactions
For those of us watching pricing activity beneath the surface, this stew of softer internal consumption, flatter import costs, and falling export prices presents a path layered with uncertainty. However, the muted reaction in currency markets suggests traders may be withholding shifts in positioning, waiting for more decisive data. That said, when considering how markets interpret this cocktail of information, the adjustment in export pricing stands out due to its potential deflationary cues, especially if it stretches across subsequent months.
These signals should be watched for momentum versus one-off anomalies. Considering Powell’s earlier statements about inflation progress requiring “more good data”, a second straight month of fading sales and flat external costs may nudge expectations closer to that line—though not forcefully pushing them over it just yet. It’s possible that consumer spending was overstated earlier in the year, and these revisions may further realign market pricing with ground-level activity.
In the immediate term, movement in yield-sensitive derivative contracts could slow as positioning cools for more clarity on rates. But beyond that, should we continue to see modest retail trends backed by steady import prices, it leaves room for forward vol markets to handle pricing more deliberately, and with less concern for immediate Fed reaction.
Vol markets might also take small cues from flatter pricing dynamics, but without surges in inflation input prices or spending rebound, the case strengthens—just incrementally—for stabilisation expectations. It’s worth watching if next month starts to repaint this trend, or reinforces it. Either way, the data now calls for shorter reaction cycles. We’re likely to see near-term options premium reflect that, especially in skew differentials among rate-sensitive curves.
