Dollar climbs after solid retail sales data
The dollar fell slightly on Monday after comments from Federal Reserve Chair Jerome Powell, while cryptocurrencies rose on bets that an assassination attempt on former President Donald Trump lifted his reelection chances.
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The dollar strengthened on Tuesday, after a reading of retail sales proved to be firmer than expected, but was not strong enough to alter expectations for the path of interest rates from the Federal Reserve.
U.S. retail sales were unchanged in June, topping expectations of economists polled by Reuters for a decline of 0.3%, as a drop in receipts at auto dealerships was offset by strength elsewhere, a show of consumer resilience that boosts economic growth prospects for the second quarter.
“It isn’t so much the overall number, but it’s the ex-autos number, which was up considerably more than expected,” said Joseph Trevisani, senior analyst at FX Street in New York.
“The auto sales are being depressed by interest rates so aside from that and of course the housing market, it looks like the consumer’s still doing pretty well and we all know that’s the base of the U.S. economy.”
Other data showed import prices were unchanged in June, as a rebound in the price of food was offset by lower energy prices, giving the Fed cushion to cut interest rates this year.
The dollar index, which measures the greenback against a basket of currencies, gained 0.17% to 104.42. The Japanese yen weakened 0.41% against the greenback to 158.64 per dollar.
Markets are still fully pricing in a rate cut of at least 25 basis points (bps) by the Fed at its September meeting, according to CME’s FedWatch Tool.
Sterling weakened 0.12% to $1.2951 ahead of British inflation data due on Wednesday while the euro was down 0.14% at $1.0879 ahead of a European Central Bank (ECB) policy meeting scheduled for Thursday.
The ECB is largely expected to keep rates steady, putting the focus on comments from President Christine Lagarde for clues on the timing of the next rate cut following a 25 bps reduction in June.
On Monday, Federal Reserve Chair Jerome Powell said the second quarter’s three U.S. inflation readings “add somewhat to confidence” that the pace of price increases is returning to the Fed’s target in a sustainable way.
The Canadian dollar weakened 0.08% versus the greenback to 1.37 per dollar after the country’s slower-than-expected rise in consumer prices in June bolstered expectations that yet another rate cut by the Bank of Canada is in the offing next week.
Cryptocurrencies paused following a rally in the prior session, along with shares of companies that could benefit from a Trump presidency, after an assassination bid on the Republican candidate boosted expectations that he would win the November election.
Bitcoin last fell 0.20% to $63,648.00 while ethereum declined 0.97% to $3401.6.