Previous session overview

The dollar pared losses against the euro and other major currencies on Wednesday after a bigger-than-expected drop in U.S. retail sales weighed on equities and economic worries that have supported the safe-haven appeal of the U.S. currency increased.

The British pound gave back some gains after hitting a two-month high versus the greenback following data showing the U.K. labor market improving further.

The euro advanced versus the dollar to buy USD1.2708, up from USD1.2693 Tuesday after struggling to hold above the USD1.2700 level.

The dollar index, which tracks the U.S. unit against a basket of six major currencies, traded at 83.568, compared with 83.564 in late North American trading on Tuesday.

The dollar turned lower against the Japanese yen, however, as the low-yielding yen is often regarded as the ultimate safe-haven. The dollar fell to JPY88.40, down from JPY88.85 late Tuesday.

Sales at U.S. retailers declined 0.5% in June, the Commerce Department estimated Wednesday, providing further evidence that the economy has slowed.

Market expectation

The dollar also remained closely linked to U.S. stock markets, which looked likely to struggle to post a seventh day of gains.

Traders will also tune in to comments from monetary-policy officials during the session. At 2 p.m. Eastern Time, the Federal Reserve is expected to release the minutes of its June meeting.

Economists warned that employment growth and the economy could suffer later in the year as the new government's planned austerity budget measures take effect, the data could bolster arguments for a rate increase by the Bank of England.

Analysts remain skeptical that the U.K. economy will maintain this pace of growth into the second half of the year given the austerity measures to be enacted, but for now the path of least resistance is clearly up and the pair could target USD1.5500 over the medium term if U.S. equities continue to rise, they say.

Disclaimer: the data made available by Dukascopy (Suisse) SAis for informational purposes only. Publication of this data by Dukascopy (Suisse) SA does not constitute provision of investment advice and Dukascopy (Suisse) SA assumes no responsibility with regard toany information, forecast or recommendation herein contained and assumes no responsibility with regard toany losses resulting from any activities conducted the basis of this data, including any investment decisions.

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