The U.S. dollar weakened versus major counterparts on Wednesday, after data showed that the nation’s retail sales declined more than forecast in September, while producer prices fell unexpectedly, pushing back expectations of an early rate hike by the Federal Reserve.
According to a report released by the Commerce Department, a significant decline in prices at the pump drove overall retail sales down 0.3 percent in September, following a 0.6 percent rise in August. Economists had been expecting sales to edge down by just 0.1 percent.
Meanwhile, Labor Department’s producer price index edged down by 0.1 percent in September after coming in unchanged in August. The modest drop surprised economists, who had expected prices to inch up by 0.1 percent.
The Federal Reserve would consider delaying an interest rate hike next year if inflation or wages fail to perk up, San Francisco Fed President John Williams said in an interview on Tuesday.
His remarks echoed recent statements from Chicago Fed President Charles Evans, who suggested on Monday that the central bank should be patient in deciding when to start its rate hike, pointing that the US economy won’t hit the Fed’s full-employment and 2 percent inflation targets for up to three years.
“It would be the first quarter of 2016 because of the risk considerations,” including a tepid pace of inflation and continued slack in the labor market, Evans said at a teacher’s investment conference in Indiana, adding that “I am a little worried that if we increase rates prematurely it might not work out.”
The greenback lost almost 1 percent against the yen to hit a 5-week low of 106.34, from an early 2-day high of 107.49. Next key support for the greenback surrounds around the 105.00 level.
The greenback declined to 1.2726 against the euro and 0.9481 against the franc, after having advanced to 2-day highs of 1.2624 and 0.9561, respectively in early deals. On the downside, the greenback may challenge support around 1.28 against the euro and 0.925 against the franc.
The dollar rose against these rivals in the previous session as signs of faltering growth in Europe underscored the relative health of the U.S. economy.
Reversing from an early near 1-year high of 1.5876 against the pound, the greenback edged lower to 1.5974. If the greenback extends its downtrend, 1.61 is seen as its next possible support level.
The U.K. unemployment rate fell to the lowest since late 2008, data from the Office for National Statistics showed.
The jobless rate fell to 6 percent during June to August, the lowest since late 2008 and down from 6.5 percent seen in March to May period. Economists had forecast a rate of 6.1 percent.
The greenback, which advanced to over a 5-year high of 1.1384 against the Canadian dollar at 7:40 am ET, briefly pared its gains to 1.1324. The greenback may find support around the 1.12 zone.
The greenback dipped to a 6-day low of 0.7917 against the NZ dollar, off early 2-day high of 0.7805. The greenback is poised to test support around the 0.80 area.
After advancing to a 2-day high of 0.8674 against the Australian dollar earlier, the greenback changed path and fell to 0.8785. Extension of the greenback’s downtrend may see it finding support surrounding the 0.885 level.
Looking ahead, U.S. business inventories for August, monthly budget statement and the Fed’s beige book are due shortly.
by RTT Staff Writer
For comments and feedback: editorial@rttnews.com
Dollar Declines After Downbeat Retail Sales, Tame Inflation
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