FX round-up: Dollar slips on weaker than forecast retail sales data

The Greenback lost ground on Friday as a spate of weaker than expected data undermined bulls and slightly lowered the odds that the Fed might hike rates again at the turn of the year.

Friday's main data point was the US retail sales report for the month of July, given how household consumption had been the main prop for that economy in 2016.

Retail sales in the US were unchanged from the previous month, down from a 0.6% increase in June and missing expectations for a 0.4% gain, the Commerce Department revealed.

Core retail sales – which exclude auto sales – declined 0.3% following a 0.7% increase in June, marking the worst reading since January and falling short of expectations for a 0.2% advance.

"It is not uncommon to see retail sales step back after several strong months and our baseline forecast indeed calls for real consumption growth to return to its 2.5% trend in Q3 after rising 4.2% in Q2. In addition, we suspect that some of the softness in July sales came from prices.

"July producer prices were soft across the board and lower food prices may be responsible for softness at grocery stores and restaurants, which together count for a quarter of overall sales. Next week’s July CPI release should confirm whether this was the case," analysts at Barclays Research wrote to clients following the release of the data.

The US dollar was lower against all the major crosses as a result, except for the pound, with euro/dollar rising from 1.1137 to 1.1164 and dollar/yen slipping from 101.957 to 101.251.

Cable on the other hand declined from 1.2956 to 1.2914.

However, the euro area was not without its own problems, as Italian GDP data for the second quarter of 2016 showed the economy flat-lined in the latest three-month stretch instead of growing at a quarterly rate of 0.2% as economists had anticipated.

That served to stoke worries about the health of the country's financial system.

Meanwhile, and in China news, Asia's largest economy was making progress on re-balancing its economy towards domestic sources of demand and consumption and away from exports and investment, but much still remained to be done, the International Monetary Fund concluded in its latest annual review of the economy.

Indeed, some risks were growing, especially those related to debt at state-owned enterprises, a problem which the Washington-based lender urged officials in Beijing to tackle urgently.

"Directors noted that China’s economic transition will continue to be complex, challenging, and potentially bumpy, against the backdrop of heightened downside risks and eroding buffers," the IMF said in its Article IV consultation.