The dollar weakened against every major currency on Friday after a surprise drop in U.S. retail sales, with EUR/USD among the gainers as the greenback slid 0.36% against the euro. Weak consumer data collided with rising bond yields on both sides of the Atlantic.
Dollar slides as retail sales miss
The euro gained 0.36% against the dollar on Friday, part of a broad dollar decline that also saw the greenback fall 0.65% against the NZD and 0.42% against the CAD. The move came after headline U.S. retail sales fell 0.6%, well below expectations for a 0.1% increase and a reversal from June's 0.2% gain. It was the first monthly decline in headline retail sales in nine months.
Excluding autos, sales fell 0.3%, while the important retail control group declined 0.4%. Building-material sales rose 0.3% and food services gained 0.5%, but motor vehicles and parts fell 1.8% and non-store retailers dropped 2.2%.
Consumer sentiment adds to the pressure
The preliminary University of Michigan consumer sentiment survey for August added to the softer picture: sentiment fell to 51.0 from 55.2 in July, below the 54.5 expected. Current conditions fell to 51.8 and expectations dropped to 50.6, both below forecasts.
Yet one-year inflation expectations edged higher to 4.3% from 4.2%, while five-year expectations held at 3.3%. Chicago Fed President Austan Goolsbee played down the significance of a single weak retail report, saying GDP and the labor market remain basically stable, though he said continued weakness in spending could become concerning.
Yields rise despite the weaker dollar
Even as the dollar softened, U.S. Treasury yields finished higher on the day, with the 10-year yield rising 5.1 basis points to 4.692%. The increase was not confined to the U.S.: European benchmark yields jumped as well, with Germany's 10-year rising 7.1 basis points to 3.205%.
Source: investingLive
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