TD Securities anticipates a decline in the US Dollar, predicting June US Retail Sales to show a 0.0% month-over-month stagnation, falling short of the consensus estimate of 0.2%. This weakness is primarily attributed to a subdued control group, negative gasoline sales due to falling prices, and a decrease in food services. Although robust auto sales, projected at 3.0% month-over-month, are expected to partially offset this broader spending weakness, the overall sentiment points to softer consumer spending.
The firm also revised its core PCE estimate for June upwards to 0.19% month-over-month from 0.14% following the CPI report, despite the downside surprise in headline June PPI, which saw a 0.3% decline (against a consensus of 0.0%) driven by negative food and energy components. These inflation indicators collectively suggest subdued inflationary pressures for the month.
Considering these economic factors, TD Securities believes the Federal Reserve will be comfortable maintaining current interest rates in July. Their broader outlook for the US Dollar in 2026 is bearish following a near-term neutral stance, citing the delicate balance between the US economy's resilience and geopolitical influences.
The US economy's strength is evidenced by robust data and rate divergence. However, the upcoming NFP release could alter this narrative if it reveals a weaker headline number or rising unemployment. Conversely, geopolitical developments, such as the reopening of the Strait, could boost risk sentiment and potentially weaken the Dollar.
