US Dollar Retreats as Weak CPI Data Overshadows Gains in Consumer Sentiment

The US dollar plummeted on Friday against the euro, the Japanese yen, and other major currencies following the release of disappointing CPI and retail sales data. The greenback failed to harness enough support from a small gain in consumer sentiment in May, which left it exposed to a steeper loss against the shared currency.

The US Bureau of Labor Statistics said in a report released at 12:30 GMT today that the consumer price index rose 0.2% in April on a seasonally adjusted basis, which matched estimates. The index gained 2.2% over 12 months, however it had a smaller 1.9% gain over the same period after excluding food and energy prices, following a 0.1% increase last month. Analysts forecasted that core consumer prices, which do not count in increases of food and energy prices, may rise 0.2% in April.

The disappointing gain in core consumer prices, which mirror inflationary pressures, could affect the monetary policy decision of the Federal Open Market Committee when it meets on June 13. The CME Group FedWatch tool, which tracks federal fund futures prices to calculate the probability of interest rate moves, showed today a 73.8% chance of increasing rates 0.25% in June from 83.1% yesterday.

A separate report from the US Census Bureau said that retail and food services sales rose 0.4% to $474.9 billion in April after a revised 0.1% gain in March. The retail sales increase was 0.2% lower than predictions, which further raised concerns about the health of the economy and weighed on the US dollar.

Retail sales increased 4.5% over a period stretching 12 months to April, led by 12.3% higher gasoline stations sales and 11.9% gain in nonstore retailer sales. Retail trade sales continued to lag behind, to rise 4.5% over the same period. The Census Bureau also said that business inventories increased 0.2% to $1.84 trillion last month, while manufacturers’ sales remained unchanged from the previous month.

The only support for the greenback came from consumer confidence data, which is compiled by the University of Michigan. A survey that was conducted by the university showed that an index of consumer sentiment rose 0.7% to 97.7 in May from 97.0 in April, while consumer expectations rose 1.3% to 88.1 from 87.0. However, the marginal gains did not stop the dollar’s losses.

EUR/USD rose to 1.0921 as of 17:40 GMT after touching 1.0929 at 15:40 GMT, the pair’s highest level since May 9. EUR/USD began trading today at 1.0862. USD/JPY declined to 113.36 from 113.85 when the day started. USD/JPY reached down to 113.25 at 15:00 GMT today, a level last seen on May 9.

The Dollar Index, which tracks the performance of the US currency against a basket of its major peers, dropped to 99.28 as of 17:37 GMT today from 99.62 yesterday.

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