The U.S. dollar lost ground against its peers on Friday, as disappointing retail sales data suggest the Federal Reserve will keep its ultra-loose monetary policy for the foreseeable futures.
Comments from several Fed officials this week that the bank is unlikely to hike rates as the surge in inflation is very likely to be a temporary one contributed as well to the currency’s weakness.
Federal Reserve Governor Christopher Waller said on Thursday that the factors putting upward pressure on inflation are temporary and the spike may last through 2022.
The Fed would not overreact to temporary overshoots of inflation, he added. Fed policymakers Lael Brainard and Richard Clarida made similar comments on Tuesday and Wednesday, respectively.
According to a report from the Commerce Department, retail sales were virtually unchanged in April after soaring by an upwardly revised 10.7% in March may also have eased recent concerns about inflation.
Economists had expected retail sales to jump by 1% compared to the 9.8% spike originally reported for the previous month.
A separate report from the Federal Reserve showed industrial production in the U.S. increased by less than expected in the month of April, climbing by 0.7%, after soaring by an upwardly revised 2.4% in March.
Economists had expected industrial production to surge up by 1% compared to the 1.4% jump originally reported for the previous month.
Meanwhile, University of Michigan released a report showed the consumer sentiment index dropped to 82.8 in May from 88.3 in April. The decrease surprised economists, who had expected the index to rise to 90.4.
The dollar index dropped to 90.28 and is at 90.32 now, down nearly 0.5% from the previous close.
Against the Euro, the dollar has weakened to $1.2143, sliding from $1.2081. The minutes of the latest rate-setting session of the European Central Bank showed policymakers are looking forward to review the Eurozone economic and inflation outlook, and the duration to continue stimulus in the monetary policy session in June.
ECB policymakers noted that the progress with vaccination campaigns and the envisaged gradual relaxation of containment measures underpin the expectation of a firm rebound in economic activity in the course of this year.
The Pound Sterling is stronger by about 0.3%, fetching $1.4095 a unit, compared with Thursday’s close of $1.4051.
The Yen is stronger at 109.36, gaining from 109.47 a dollar.
The dollar slipped to 0.7780 against the Aussie, giving up about 0.65%.
The Swiss franc firmed up to 0.9021 a dollar from 0.9064, while the Loonie strengthened to 1.2111 a dollar, gaining about 0.42%.
Data from Statistics Canada showed manufacturing sales in Canada increased by 3.5% in March, after falling 1.6% a month earlier.
The data also showed Canadian wholesale sales rose by 2.8% in March, after coming in at -0.7% in February.