GBP/USD Rises to Nearly Three Month High as Dollar Edges Lower
The dollar fell against a basket of major currencies despite a rise in retail sales for the first time in four months as a strong rally in sterling added to downside momentum.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell 0.39% to 89.16.
The Commerce Department said on Monday that retail sales fell 0.6% last month, topping economists’ forecast for a 0.4% increase.. The retail sales control group – which has a larger impact on U.S. GDP – rose 0.4% in-line with expectations.
The Federal Reserve Bank of New York, meanwhile, revealed lower-than-expected Empire State Manufacturing Index reading of 15.80.
The upbeat retail sales print did little to help the dollar recover as market participants said the data is not likely to significantly boost first-quarter U.S. GDP growth, but remained confident that consumer spending will “accelerate” given the strong labor market and recent tax cuts.
“Tax cuts and a tighter labor market should support household spending going forward and we expect consumption to accelerate over the remainder of the year as a result," CIBC said.
A sharp rise in GBP/USD to $1.4329, up 0.63%, to a nearly three-month high, weighed on the greenback as sterling continued to benefit from the European Union and UK's agreement on both divorcing terms and a 21-month post-Brexit transitory period.
USD/JPY fell 0.13% to Y107.27 as traders focused on developments in Japan, where approval ratings for Japan prime Minister Shinzo Abe continued to drop.
Support for Abe fell to 26.7%, Reuters reported, citing a survey by private broadcaster Nippon TV released on Sunday. Standard Chartered warned that historically a drop in the approval rating to 30% “has been a pivotal level for regime changes.”