The US dollar managed to find demand in the early trading hours of the American session on Tuesday. The US Dollar Index (DXY), which fell to a daily low below 99.60, recovered near 100.00 and pared losses.
Retail sales in the US rose 0.2% in June to $689.5 billion, according to a US Census Bureau report on Tuesday. The 0.3% increase recorded in May was also revised higher to 0.5%. Retail Sales excluding Vehicles rose 0.2% in the same period, slightly below market expectations of 0.3%.
US stock index futures traded slightly lower today after the US Retail Sales data. The 10-year US bond yield remained low in the 3.75% region following the impact of activity on Monday. After a mixed opening, Wall Street's main index closed in positive territory on Monday, driven by positive performance of technology stocks, the Nasdaq Composite Index rose almost 1%.
China's real GDP grew by 6.3% in the second quarter of the year, according to data released by China's National Bureau of Statistics (NBS). This reading is higher than the 4.5% growth in the first quarter but still below market expectations of 7.3%. Citigroup lowered its full growth forecast for China to 5% from 5.5%.
US Treasury Secretary Janet Yellen told Bloomberg that there is a good chance that the Biden administration will implement controls on outbound investment into China. The US dollar weakened significantly last week as slowing inflation data from the US raised expectations of the Federal Reserve reaching a terminal rate hike of 25 basis points (bps) in July.
The Consumer Price Index (CPI) in the US rose 3% year-on-year in June, compared to the 4% increase recorded in May. The annual Producer Price Index (PPI) rose 0.1% in the same period.
Commenting on the outlook for the US Dollar, "If inflation declines faster and economic data weakens, the market may increasingly expect key rates not to remain at high levels for long, while a rate cut before the end of the year is increasingly likely," said Antje Praefcke, Analyst FX at Commerzbank. "This will cause the US Dollar to weaken further."
The University of Michigan reported on Friday that the Consumer Sentiment Index rose to 72.6 in July's flash estimate from 64.4 in June.
The Federal Bank of New York's Empire State Manufacturing Survey for July, released on Monday, showed that the General Business Conditions Index decreased to 1.1 from 6.6 in June.
Markets are almost entirely counting on a 25 bps Fed rate hike in July. The probability of another rate hike in December is in the 20% region, based on the CME Group's FedWatch Tool.
