Fed Hike Odds Plummet to 31% Amid Retail Sales and Consumer Sentiment Collapse
A significant drop in retail sales and consumer sentiment has led to a collapse of the probability of a September Federal Reserve rate hike. According to the CME FedWatch tool, the odds of a September hike have fallen from roughly 50% one month ago to 31% today.
July retail sales fell 0.6% from June to $763.6 billion, which is the largest monthly decline in over a year. Motor vehicle and parts dealers fell by 1.8%, while online retailers dropped 2.2%. Consumer confidence also fell further than expected in August, with the University of Michigan's preliminary Consumer Sentiment Index dropping to 51.0.
The Strait of Hormuz remains a risk for the gold price as tanker attacks have dashed hopes for a deal to reopen the waterway. This has kept energy inflation elevated, giving Fed hawks their strongest remaining argument for a September hike.