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17/07/24
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USD Lower on Hopes of Fed Rate Cut Soon
On Wednesday, the U.S. dollar dropped to multi-month lows.
The U.S. dollar index, which measures its strength against 6 other major currencies, traded down 0.5% at 103.402, dropping to its lowest level since March.
On Wednesday, the dollar traded on the back foot amid hopes that the U.S. Federal Reserve would begin cutting interest rates in September to boost an easing economy.
In June, U.S. retail sales did not grow, and although this indicated a degree of consumer resilience it did not change market views significantly for a rate cut at the next Federal Reserve meeting, which is now priced in fully.
Analysts at ING said in a note real retail sales were still about 4% lower than their peak in 2021 despite the positive data. Rising unemployment rates, moderating inflation, and slower consumer spending growth might affect the sector going forward, and analysts expected this to feed into the lower Fed rate narrative.
The Fed’s Beige Book, as well as building permits and housing starts data for June will be studied carefully for indications of economic weakness.
In June, the headline consumer price index was steady at 2% on an annual basis versus forecasts for an increase of 1.9%, while services inflation came in at 5.7%.
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