By Laura Matthews and Stefano Rebaudo
(Reuters) – The U.S. dollar fell on Thursday as traders digest a slew of mixed economic data to gauge the outlook for the Federal Reserve’s interest rate cuts this year.
U.S. retail sales rose 0.4% last month after upward revisions the previous month, data from the Commerce Department’s Census Bureau showed.
Meanwhile, the number of Americans filing new applications for unemployment benefits increased more than expected last week, but remained at levels showing a healthy labor market.
The Philadelphia Fed Business Index, which jumped to 44.3 in January, was the lone surprise as the forecast was for a reading of minus 5.
The U.S. dollar index – a measure of the value of the greenback relative to a basket of foreign currencies – pared earlier gains and was last down 0.09% at 108.92.
“I think retail sales didn’t really have a significant impact,” said Vassili Serebriakov, FX strategist, at UBS Investment Bank.
“CPI had an impact initially in terms of weakening the dollar, but that was quickly reversed. And I think that just indicates that the market is still strongly biased to buy the dollar on dips, probably in anticipation of the inauguration next week, and the potentially dollar-supportive policies of the incoming Trump administration, including the possibility that tariffs will be raised relatively quickly.”
Donald Trump returns to the White House next week, and analysts expect some of his policies to boost growth as well as increase price pressure.
The focus of the day will be the nomination hearing of Trump’s choice of Scott Bessent to head the Treasury Department.
Bessent, facing questioning before the U.S. Senate Finance Committee, is expected to keep a leash on U.S. deficits and to use tariffs as a negotiating tool, mitigating the expected inflationary impact of economic policies expected from the Trump administration.
His testimony “could create some potential headlines for the bond market and in turn the FX market,” said Erik Bregar, director of FX & precious metals risk management, at Silver Gold Bull in Toronto.
Traders who have been growing more worried about inflation responded with relief to Wednesday’s U.S. data, buying stocks and sending benchmark 10-year Treasury yields down more than 13 basis points.
Treasury yields slipped on Thursday, after Federal Reserve Governor Christopher Waller said three or four interest cuts this year were still possible if U.S. economic data weakened further.
Analysts flagged that the U.S. consumer price data was better than expected, but still showing inflation above Federal Reserve targets. The figures provided the U.S. bond market with an excuse to do some downside testing for yields.
Bregar said the arguably mixed data was the reason there was choppy trading in the euro dollar pair following Thursday’s data release.
The euro was flat at $1.029, while sterling was down 0.15% at $1.2226 against the dollar, having also earlier dropped sharply against the yen on Thursday as investors focused on monetary policy divergence after last week’s selloff in gilts and the pound.
The dollar is down 0.67% against the yen at 155.43, its lowest level since Dec. 19.
China’s yuan, seen on the front lines of tariff risk, was pinned near the weak end of its trading band at 7.3316. [CNY/]
Currency
bid
prices at
16
January
04:49
p.m. GMT
Descripti RIC Last U.S. Pct YTD Pct High Low
on Close Change Bid Bid
Previous
Session
Dollar 108.91 109.03 -0.1% 0.39% 109.4 108.
index 86
Euro/Doll 1.0303 1.029 0.14% -0.47% $1.0312 $1.0
ar 26
Dollar/Ye 155.24 156.505 -0.87% -1.4% 156.42 155.
n 135
Euro/Yen 159.97 160.97 -0.62% -1.99% 161.08 159.
77
Dollar/Sw 0.9108 0.9129 -0.24% 0.35% 0.9142 0.91
iss 03
Sterling/ 1.2239 1.2245 -0.03% -2.13% $1.2248 $1.2
Dollar 173
Dollar/Ca 1.4384 1.4339 0.32% 0.03% 1.4401 1.43
nadian 24
Aussie/Do 0.622 0.6227 -0.04% 0.6% $0.6248 $0.6
llar 192
Euro/Swis 0.9384 0.9389 -0.05% -0.1% 0.9394 0.93
s 71
Euro/Ster 0.8416 0.8402 0.17% 1.74% 0.8438 0.84
ling 07
NZ 0.5616 0.5616 0.09% 0.45% $0.5633 0.55
Dollar/Do 82
llar
Dollar/No 11.354 11.3256 0.25% -0.1% 11.4002 11.3
rway 108
Euro/Norw 11.7005 11.6542 0.4% -0.58% 11.714 11.6
ay 48
Dollar/Sw 11.1361 11.1536 -0.16% 1.08% 11.1937 11.1
eden 31
Euro/Swed 11.4743 11.4806 -0.05% 0.06% 11.499 11.4
en 754
This post is originally published on INVESTING.
