Dollar Gains Amid Strong Retail Sales and Rate Cut Expectations

The dollar strengthened as retail sales exceeded expectations, indicating economic resilience. U.S. retail sales remained stable in June, and while auto sales dipped, other sectors showed strength. The Federal Reserve and Central Banks' potential interest rate cuts were also discussed, impacting global currencies and markets.

The dollar strengthened on Tuesday after retail sales proved to be firmer than expected, although not enough to change expectations for the Federal Reserve's interest rate path. U.S. retail sales remained unchanged in June, surprising economists who had predicted a 0.3% decline. Strength in various sectors offset a drop in auto dealership receipts, indicating consumer resilience which bolsters economic growth prospects for Q2.

Joseph Trevisani, senior analyst at FX Street in New York, emphasized the significance of the ex-auto numbers, which rose more than anticipated despite interest-rate pressures on auto and housing markets. Import prices also held steady in June, balancing increases in food prices with lower energy costs, giving the Fed room to potentially cut rates this year.

Meanwhile, the dollar index rose 0.17% to 104.42, and the yen weakened by 0.41% to 158.64 per dollar. Market expectations for a Fed rate cut of at least 25 basis points in September remain unchanged. Sterling and the euro fell against the dollar, with investors eyeing British inflation data and an ECB policy meeting this week. Federal Reserve Chair Jerome Powell's recent comments on inflation readings supporting the Fed's target were also noted. The Canadian dollar dipped amid slower-than-expected consumer prices, supporting rate cut expectations by the Bank of Canada. Cryptocurrencies saw a pause with Bitcoin falling 0.20% to $63,648.00 and Ethereum declining 0.97% to $3401.6.

(With inputs from agencies.)