US Dollar Edges Lower amid Thin Trading and Disappointing Retail Sales

The US dollar weakened against most of its major peers on Friday, as investors felt disappointed following the release of two economic reports that were expected to reveal stronger data. Trading was thin today as markets in the United States, Canada, the United Kingdom and Australia closed for the Good Friday holiday.

The US Bureau of Labor Statistics released a new reading for its consumer price index at 12:30 GMT. The index had a 0.3% decline in March after gaining 0.1% in the previous month on a seasonally adjusted basis, while economists had forecast another 0.1% gain in the last month. Over the past 12 months, the index gained 2.4%.

The core consumer price index, which excludes gains in food and energy prices, declined 0.1% in March, which disappointed expectations of a 0.2% gain and marks the first drop since January 2010. In the 12 months ended March, the core consumer price index gained 2.0%, which failed to match a predicted gain to 2.3%, from 2.2% in February.

Changes in consumer prices, which reflect the rate of inflation, are closely followed by the Federal Reserve as one of the main indicators used by the central bank when deciding its monetary policy. The Federal Open Market Committee already started moving to higher interest rates as inflation approached its 2.0% target, but slower gains in consumer prices may change the pace of raising rates. The US dollar’s strength increases with higher interest rates.

Simultaneously to the consumer prices data, a report on retail sales in the United States was released by the US Census Bureau. Retail sales amounted to $470.8 billion in March, a decrease by 0.2% from February, when retail sales had a revised 0.3% loss, according to the report. March’s drop was bigger than the market’s anticipation of a 0.1% decline. The report added that core retail sales were unchanged from the previous month, despite forecasts of a 0.1% increase.

EUR/USD traded at 1.0621 as of 14:15 GMT on Friday, from 1.0628 as of 12:55 GMT, the pair’s highest level today. EUR/USD began the day at 1.0616. GBP/USD was at 1.2526, after touching 1.2529 at 12:55 GMT, which was also the pair’s strongest point for the day. GBP/USD was at 1.2505 when trading started today.

The Dollar Index, which measures the performance of the greenback against its main counterparts, was at 100.43 as of 14:08 GMT today, from 100.56 yesterday.

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