US Consumption Weakens, Dollar Slumps Further
The US dollar extended its decline during Friday's trading (August 14) after July retail sales fell 0.6% month-on-month—far worse than the projected 0.1% increase. Sales excluding vehicles and gasoline also dropped 0.2%, while "control group" sales weakened by 0.4%. These data reinforce signals that US consumer spending momentum is losing steam.
The market reaction was clearly reflected in the dollar. Recent checks show the DXY index falling approximately 0.37% to the 99.60 level. This weakness followed earlier reports of relatively subdued CPI and PPI figures; consequently, this latest string of data further diminishes the urgency for the Federal Reserve to raise interest rates again in the near term.
The euro was a primary beneficiary of the greenback's weakness. The EUR/USD pair rose about 0.34% to 1.1568, while GBP/USD strengthened by approximately 0.39% to 1.3538. The pound also received a boost from relatively solid UK economic data, having already been on track for a weekly gain against the dollar.
Commodity-linked currencies also moved higher. AUD/USD rose around 0.33% to 0.7083, and NZD/USD surged approximately 0.68% to 0.5890. The Canadian dollar also strengthened, evidenced by USD/CAD falling about 0.42% to 1.3873. Dollar weakness served as the main catalyst, while the Aussie and Kiwi continued to draw support from expectations of relatively tight domestic monetary policy.
The Japanese yen and Swiss franc also strengthened against the dollar. USD/JPY fell roughly 0.32% to the 158.98 area, moving further away from the psychological 160 level—a point that has drawn market attention regarding potential intervention by Japan. USD/CHF also declined by approximately 0.28% to 0.8117. The 10-year US Treasury yield is hovering around 4.65%, while US stock futures remain near session highs.
Newsmaker Analysis: Retail sales figures that were significantly weaker than expected have reinforced a combination of negative sentiment for the dollar: inflation is cooling, the labor market is softening, and consumer spending is now also showing signs of losing momentum. Unless subsequent US data shows renewed strength, the DXY is likely to remain under pressure, giving EUR/USD, GBP/USD, AUD/USD, and NZD/USD room to sustain their gains. However, if the weakness in consumption escalates into fears of a more serious economic slowdown, safe-haven demand for the dollar could re-emerge. (arl)
Source: Newsmaker.id
