US August retail sales beat expectations, violent rate cut bets by the Federal Reserve still prevail
U.S. retail sales unexpectedly rose by 0.1% in August, exceeding the expected -0.2%, indicating a solid economic foundation. Core retail sales increased by 0.3%, with consumer spending accelerating. Following the data release, the U.S. dollar index rose in the short term, while spot gold fell. Investors are expecting the Federal Reserve to announce a rate cut on Wednesday, with a market inclination of a 67% probability of a 50 basis point rate cut
Data released on Tuesday showed that U.S. retail sales unexpectedly rose in August, suggesting that the U.S. economy remained on a solid footing for most of the third quarter.
U.S. retail sales in August recorded a 0.1% monthly increase, exceeding expectations of -0.2%, with the previous value revised up from 1% to 1.1%. Excluding automobiles, gasoline, building materials, and food services, retail sales, which were revised upward to 0.4% in July, increased by 0.3% last month. Core retail sales are most closely aligned with the consumer spending component of GDP. Consumer spending accelerated in the second quarter, putting it on a higher growth path before entering the July-September quarter.
Following the data release, the U.S. dollar index rose nearly 20 points in the short term, while spot gold fell by $8 in the short term, briefly dropping below $2570 before quickly rebounding.
"Last important data before the Fed interest rate decision" was released, with investors generally expecting the Fed to cut interest rates for the first time since 2020, with the latest policy decision to be announced at 2 p.m. Eastern Time on Wednesday.
Institutional analysts evaluating U.S. retail sales data stated that it is unlikely to have a significant impact on this week's FOMC policy report.
The market has been debating how large the Fed's rate cut will be. With signs of a slowdown in the labor market and inflation falling to the Fed's 2% target, the market has been pricing in a 50 basis point rate cut by the Fed.
According to CME's FedWatch tool, there is a 67% probability of the Fed cutting rates by 50 basis points, while the probability of the Fed opting for a smaller 25 basis point rate cut is 33%.
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