FX roundup: Dollar drops on US retail sales, PPI; pound underpinned by jobs data

The dollar was weaker against the euro and the pound on Tuesday, sticking to a downward trend following disappointing retail sales and PPI figures, as investors readjust to the likelihood than an interest-rate hike from the Federal Reserve won’t take place this year.

David Morrison, market strategist at SpreadCo, said: “A steady stream of weaker US economic data - particularly the payroll number at the beginning of the month - has reinforced this view. China’s poor import number and tepid consumer price index have also added to the dollar’s woes.”

US retail sales figures and PPI weighed on the dollar further, causing it to take another leg lower after the releases.

According to the Department of Commerce, retail sales in the US rose 0.1% in September on the month, compared with a flat reading in August and a touch below analysts’ expectations of a 0.2% increase.

US wholesale prices also disappointed, showing a 0.5% month-on-month decline in September, which was steeper than the 0.2% drop analysts were expecting.

At 1345 BST, the euro was 0.5% higher against the greenback at $1.1438 while the pound was up 1.1% at $1.5409.

Sterling’s gains came on the back of better-than-expected jobs data, which showed the unemployment rate unexpectedly fell in August, to 5.4% - its lowest level since mid-2008.

The pound rose 0.5% against the single currency to €1.3470.

Kit Juckes, global strategist at Societe Generale, said: “The euro remains range-locked. The ZEW data yesterday were very weak (the auto sector index spectacularly so).

“There is a bias for the euro to edge towards $ 1.1460 and a sense across the market that ECB jawboning isn’t enough to get the currency down, but it’ll take a catalyst for the move gather speed. Our sense though, is that if words aren’t enough, then ECB action may not be forthcoming very quickly. EUR/USD may need to get back above 1.20 before the ECB acts really aggressively.”

The yen remained a little weaker against the dollar, down 0.3% at JPY119.32.