The U.S. dollar index (DXY) declined by 0.41% following weak retail sales and consumer sentiment reports, reducing the likelihood of a Federal Reserve rate hike in September to 29% from 35%. July retail sales fell by 0.6% month-over-month, significantly below the expected increase of 0.1%. Excluding autos and gas, retail sales dropped by 0.2%, also missing projections of a 0.3% increase. Additionally, the University of Michigan’s preliminary August consumer sentiment index dropped by 4.2 points to 51.0, further illustrating consumer concerns.
The euro traded up 0.45% as market expectations shifted regarding the European Central Bank, which now has a 91% probability of a 25 basis point rate hike on September 10, contrasting sharply with the Fed’s reduced rate hike expectations. The Japanese yen also strengthened slightly, supported by an 81% chance of a Bank of Japan rate hike in September, as the Japanese government indicated support for such a move amidst rising inflation concerns.
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