Dollar drops on downbeat U.S. retail sales

Dollar drops on downbeat U.S. retail sales

dollarThe dollar index, which tracks the greenback’s movements versus a basket of major currencies, retreated after a report showing U.S. retail sales stalled in April.

In fact, the report raises concerns about the health of the economy in the second quarter, following the sharp ease in growth in the first three months.

Retail sales recorded zero percent in April from an upwardly revised of 1.1 percent in March. Core retail sales rose 0.1 percent from a revised of 0.7 percent.

U.S. officials said the slowdown in first-quarter growth to 0.2 percent was due to the cold weather, but the weak retail sales figures raise worries the weak pace may continue in the second quarter.

While U.S. unemployment dropped to 5.4 percent, the lowest since 2008, the wage growth is still weak, which means American may lower their consumption that will eventually weigh on growth.

The Fed is likely to postpone the decision of raising interest rates until making sure economic growth is on the right track.

Many analysts predict the rate hike to take place later this year in September or October, instead of previous forecasts of June.

The uncertainty about the timing at which the Fed would raise interest rates have been one of the key factors affecting the dollar negatively.

Investors will keep tracking U.S. data to get clues when the Fed would its borrowing cost.

As of 13:50 GMT, the dollar index fell to a low of 93.88, compared with the session’s opening of 94.61.

The Parabolic SAR is still above the price as the uptrend remains in place, while the RSI 14 momentum indicator has the chance to creep lower since it is still above the oversold areas.

USDX

Ahmed Mamdouh

Ahmed Mamdouh, Co-Founder and Head of English Fundamental Analysis at FXComment.com, with 7 years of experience in the financial markets. Mamdouh holds a Master’s Degree in Economics from The American University in Cairo and a Bachelor Degree in Economics from The Faculty of Economics and Political Science, Cairo University.

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