Soft Inflation Data, Retail Sales Pull Down U.S. Dollar

The U.S. dollar weakened against its major counterparts in the New York session on Wednesday, as consumer inflation data and retail sales came in lower than expected in April, strengthening expectations that the Federal Reserve will reduce interest rate in September.

Data from the Labor Department showed that the consumer price index increased by 0.3 percent in April after rising by 0.4 percent in March. Economists had expected consumer prices to climb by another 0.4 percent.

Excluding food and energy prices, core consumer prices still rose by 0.3 percent in April after climbing by 0.4 percent in March. The increase in core prices matched economist estimates.

The report also said the annual rate of consumer price growth slowed to 3.4 percent in April from 3.5 percent in March, in line with expectations.

The annual rate of core consumer price growth decelerated to 3.6 percent in April from 3.8 percent in March. The slowdown also matched estimates.

The Commerce Department released a separate report showing retail sales in the U.S. unexpectedly came in flat in the month of April.

The Commerce Department said retail sales were virtually unchanged in April after climbing by a downwardly revised 0.6 percent in March.

Economists had expected retail sales to rise by 0.4 percent compared to the 0.7 percent increase originally reported for the previous month.

Markets expect the Fed to deliver 51 basis points of cuts this year, with the initial move likely in September.

The greenback fell to a fresh 5-week low of 1.0869 against the euro and a 5-week low of 1.2670 against the pound, from yesterday's close of 1.0819 and 1.2591, respectively. The greenback is likely to face support around 1.10 against the euro and 1.29 against the pound.

The greenback weakened to a 1-week low of 154.74 against the yen and near a 2-week low of 0.9013 against the franc, from yesterday's closing values of 156.39 and 0.9064, respectively. The greenback is poised to challenge support around 147.00 against the yen and 0.89 against the franc.

The greenback declined to a 5-week low of 1.3588 against the loonie, 4-month low of 0.6679 against the aussie and near a 2-month low of 0.6101 against the kiwi, from Tuesday's close of 1.3650, 0.6626 and 0.6040, respectively. The greenback is seen finding support around 1.34 against the loonie, 0.68 against the aussie and 0.62 against the kiwi.

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