US: Spending resilience supports Dollar – UBS

💡 DMK Insight

Consumer spending is holding strong, and here’s why that matters for traders: Paul Donovan’s prediction about December retail sales suggests that despite rising tariffs, consumers are still willing to spend. This resilience could indicate a robust economic backdrop, which often supports asset prices across the board. For traders, this means keeping an eye on sectors like retail and consumer discretionary stocks, which might see upward momentum if sales figures come in strong. Additionally, the impact on GDP from tariffs being absorbed through lower savings rates could signal a shift in consumer behavior that might affect inflation expectations. If retail sales exceed expectations, we could see a bullish reaction in equities and a potential strengthening of the dollar against other currencies. However, it’s worth noting that if consumer spending is propped up by dwindling savings, it raises questions about sustainability. Traders should monitor the upcoming retail sales data closely, particularly any surprises that could shift market sentiment. Key levels to watch include the performance of the S&P 500 and the dollar index, as both could react sharply to this data release.