(Updated at 1500 EDT (1900 GMT))
The U.S. dollar rose from a 15-month low against a basket of currencies on Tuesday after core retail sales saw strong gains in June, as investors wait on the Federal Reserve’s interest rate decision next week.
Headline U.S. retail sales rose less than expected in June, with a 0.2% increase during the month. Data for May was also revised higher to show sales gaining 0.5% instead of 0.3% as previously reported.
Core sales showed more resilience, however. Excluding automobiles, gasoline, building materials and food services, retail sales increased 0.6% in June. Data for May was revised slightly up to show core retail sales increasing 0.3% instead of the previously reported 0.2%.
The softer-than-expected headline number suggests that "the Fed is making some progress,” said Bipan Rai, North American head of FX strategy at CIBC Capital Markets in Toronto.
However, “you still did get a fairly strong control group number - that’s going to feed through to GDP and domestic demand. That’s still very much supportive of the fact that the Fed does need to hike rates again later this month,” Rai said.
The dollar tumbled after consumer and producer price gains slowed in June, boosting expectations that the U.S. central bank will stop hiking rates after a widely expected 25 basis-point increase at its July 25-26 meeting.
Fed funds futures traders are pricing in an additional 33 basis points of tightening this year, with the benchmark rate expected to peak at 5.40% in November. FEDWATCH
Other data on Tuesday showed production at U.S. factories unexpectedly fell in June, but rebounded in the second quarter as motor vehicle output accelerated after two straight quarterly declines.
Traders will also be watching inflation releases from regions including the eurozone, Britain and Japan this week for further clues about whether inflation is cooling globally.
The dollar index =USD was last up 0.04% on the day at 99.924, after earlier falling to 99.549, the lowest since April 2022.
Bank of America analysts noted in a report on Tuesday that recent weakness in the greenback has exceeded the drivers of the move, which "can typically be attributed to stretched positioning and sentiment, as well as technical breaks."
In particular the analysts note that gains in the Norwegian krone and Japanese yen have exceeded their expected moves, and that they expect yen underperformance to resume "once the dust settles."
The dollar rose 0.10% against the Japanese yen JPY=EBS to 138.83, after dropping to 137.245 on Friday, the lowest since May 17.
The euro EUR=EBS was little changed on the day at $1.1229 after earlier hitting $1.12760, the highest since Feb. 2022.
European Central Bank (ECB) governing council member Klaas Knot said on Tuesday that the bank will look closely for signs of inflation cooling down in the coming months to avoid taking rate hikes too far.
The European Central Bank is expected to raise interest rates by 25 basis points next week.
0#ECBWATCH The British pound GBP=D3 fell 0.22% to $1.3046, after hitting $1.31440 on Thursday, the highest since April 2022.The Australian dollar AUD=D3 fell 0.07% to $0.6813 after minutes of the Reserve Bank of Australia's (RBA) July policy meeting released on Tuesday provided no major surprises on the rate outlook.
======================================================== Currency bid prices at 3:00PM (1900 GMT)Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Dollar index =USD 99.9240 99.9030 +0.04% -3.446% +100.1000 +99.5490 Euro/Dollar EUR=EBS $1.1229 $1.1228 +0.01% +4.80% +$1.1276 +$1.1209 Dollar/Yen JPY=EBS 138.8300 138.6950 +0.10% +5.89% +139.1300 +137.6900 Euro/Yen EURJPY= 155.88 155.86 +0.01% +11.10% +156.1400 +154.8800 Dollar/Swiss CHF=EBS 0.8574 0.8603 -0.33% -7.27% +0.8607 +0.8556 Sterling/Dollar GBP=D3 $1.3046 $1.3074 -0.22% +7.87% +$1.3125 +$1.3029 Dollar/Canadian CAD=D3 1.3174 1.3199 -0.19% -2.77% +1.3243 +1.3168 Aussie/Dollar AUD=D3 $0.6813 $0.6817 -0.07% -0.07% +$0.6837 +$0.6789 Euro/Swiss EURCHF= 0.9625 0.9668 -0.44% -2.73% +0.9672 +0.9626 Euro/Sterling EURGBP= 0.8607 0.8589 +0.21% -2.68% +0.8608 +0.8578 NZ NZD=D3 $0.6280 $0.6326 -0.72% -1.09% +$0.6344 +$0.6261 Dollar/DollarDollar/Norway NOK=D3 10.0470 10.0240 +0.33% +2.48% +10.1150 +10.0400 Euro/Norway EURNOK= 11.2816 11.2868 -0.05% +7.51% +11.3600 +11.2752 Dollar/Sweden SEK= 10.2108 10.2468 -0.47% -1.89% +10.2678 +10.1716 Euro/Sweden EURSEK= 11.4590 11.5129 -0.47% +2.78% +11.5434 +11.4469
