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US Dollar Falls As Retail Sales and Inflation Data Miss

US Dollar Falls As Retail Sales and Inflation Data Miss

Omar Habib, Contributor


Talking Points:

- US Retail Sales data came-in below expectations, but previous data was revised up.

- Headline and Core PPI came in well below expectations.

-USD/CAD falls sharply as USD strengthened on the news; USD Index is trading lower.

July US Advance Retail Sales surprised to the downside, coming in at +0.0%, below the expectation of +0.4%. However, last month’s read of +0.6% was revised up to +0.8%. The weakness continued through U.S. data as Retail Sales Less Autos fell by -0.3%, below the expectation of +0.1%, and Less Autos and Gas fell by -0.1%, compared to the expectation of +0.3%.

The other pertinent USD- release on the morning, the July US Producer Price Index, also came in worse than expected. Core PPI (ex Food and Energy) grew +0.7% from a year earlier, well below expectations of +1.2% (y/y). Headline prices contracted by -0.2% (y/y), below the expectation of +0.2%.

Today’s reports serve to highlight additional questions on the strength of the US consumer, who led the way with positive GDP readings in Q1 and Q2. Personal Consumption Expenditures, roughly 72% of GDP, grew by 4.2% in the second quarter. Weaker Retail Sales data may lead policymakers to question whether the US consumer, the engine of the US economy, is showing signs of slowing down.

Here are the data driving the US Dollar this morning:

- USD Advanced Retail Sales (JUL): +0.0% versus +0.4% expected, from +0.8% (m/m).

- USD Retail Sales Less Autos and Gas (JUL): -0.1% versus +0.3% expected, from +0.7% (m/m).

- USD Producer Price Index (JUL): -0.2% versus +0.2% expected, from +0.3% (y/y).

See the DailyFX economic calendar for Friday, August 12, 2016

Chart 1: EUR/USD 1-minute Chart (August 12, 2016 Intraday)

In the immediate wake of the data, the US Dollar fell sharply against the Canadian dollar, with the USD/CAD falling to C$1.29320 from C$1.29771. By the time this report was written, the pair was trending near C$1.29350. With FX volatility edging higher again, it’s the right time to review risk management principles to protect your capital.

--- Written by Omar Habib, DailyFX Research

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.