The US dollar fell against the euro and other major currencies on Friday as retail sales in the United States unexpectedly declined last month. The retail sales drop was the first since June, which pushed an index that tracks the greenback to the weakest level in about a week.
US consumers were reluctant to spend more in August, which caused a 0.2% drop in retail sales as was reported today by the US Census Bureau. Analysts forecasted a 0.1% gain following a bigger 0.3% increase in July. However, a smaller number than expected of car purchases and fewer clothes and electronics sales weighed on retail sales last month.
The drop in August was the biggest in 6 months, while July gain was revised to a smaller increase than previously reported. Automotive sales, which account for about 20% of US retail sales, dropped 1.6% last month. Clothing stores reported a 1.0% decline, while electronics and appliance stores had 0.7% fewer sales.
The US Census Bureau added that core retail sales, which exclude auto sales, rose 0.2% in August after increasing by 0.4% in July. However, most of the gain was due to higher gasoline prices, which caused a 2.5% jump in sales at gas stations. Gasoline prices increased in the wake of the heavy damage that Hurricane Harvey caused to refinery operations in the Gulf of Mexico.
Todayâs retail sales data may provide the Federal Reserve with more evidence that it should wait before tightening monetary policy again. Next week, the Federal Open Market Committee will hold a monetary policy meeting, during which policymakers may keep interest rates unchanged.
Future prices of federal funds show that investors are pricing in the possibility of an interest rate hike when the monetary policy committee meets in December at 51%, according to the CME FedWatch tool.
Geopolitical woes also weighed on the US dollar today. A missile fired by North Korea went over Japan, which marked the second launch towards Japan in about a month. The launch followed North Koreaâs threat yesterday to attack Japan with a nuclear weapon and turn the United States to ashes.
US Secretary of State Rex Tillerson called for stronger measures against North Korea, adding that recent provocations will only increase the isolation of the outcast state.
EUR/USD traded at 1.1953 at 16:45 GMT on Friday after touching 1.1984 at 13:20 GMT, The pairâs best level in two days. EUR/USD began trading today at 1.1920.
The Dollar Index, which tracks the performance of the US currency against a basket of its major peers, dropped to 91.80 as of 16:37 GMT today, the lowest level since September 8. The index plummeted to 91.61 at 13:20 GMT from 92.12 yesterday, before recovering some of its losses.
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