Dollar weakens on Fed cut expectations

17 Jul 2024 , 09:54 AM

The dollar was neutral on Wednesday, following a tiny but brief boost from better-than-expected US retail sales data, as traders focused on the possibility of Federal Reserve rate reduction as early as September.

The New Zealand currency surged as statistics indicated non-tradeable inflation was higher than expected in the second quarter, despite the headline figure below expectations. The kiwi last rose 0.46% to $0.6078.

Data released on Tuesday revealed that U.S. retail sales remained constant in June, with a dip in receipts at auto dealerships offset by widespread strength elsewhere, demonstrating consumer resilience and bolstering economic growth predictions for the second quarter.

While the dollar rose early on the data, it failed to maintain its gains as the report did little to change market expectations for a Fed cut in September, which is already fully priced in.

The euro last traded at $1.0897 against the US dollar, maintaining near a four-month high reached earlier this week.

The dollar index remained at a one-month low, closing at 104.26, while the Australian dollar dropped 0.05% to $0.6730.

Meanwhile, sterling was little changed at $1.2972 ahead of UK inflation data due later on Wednesday.

Consumer prices are expected to have cooled more in June, adding to the case for the Bank of England’s approaching easing cycle.

The yen was last down 0.1% at 158.47, as traders remained on the lookout for any intervention by Japanese officials to prop up the currency, which they had likely done last week.

Data released on Tuesday by the Bank of Japan revealed that Tokyo may have spent 2.14 trillion yen ($13.5 billion) intervening on Friday last week. In addition to the projected amount spent on Thursday, Japan is suspected of purchasing over 6 trillion yen through intervention last week.

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