Dollar trades higher after mixed US data, but Mideast conflict keeps mood tense
The U.S. dollar pared losses to trade firmer on the yen on Tuesday, after economic data showed American consumers growing more cautious as trade and inflation uncertainty lingered ahead of the Federal Reserve's decision on interest rate later this week.
U.S. retail sales were softer than expected in May, but consumer spending remained supported by solid wage growth.
The dollar initially softened on the print, but quickly reversed those loses as the market digested the data's mixed picture, removing strength the yen had gained following the Bank of Japan's (BOJ) rate decision earlier.
"The weaker headline retail sales release and last week's softer CPI print add more fuel to rate cut speculation, including calls from (U.S. President) Trump for a 100-bps cut," said Uto Shinohara, senior investment strategist at Mesirow Currency Management. "However, the full inflationary impact of tariffs has yet to pass through."
Broader risk sentiment remained fragile with the Israel-Iran conflict entering its fifth day.
The BOJ delivered little surprise to markets at the conclusion of its two-day monetary policy meeting, as it stood pat on rates and laid out a new plan to decelerate the pace of its balance sheet drawdown next year in the face of rising risks such as the Middle East conflict and U.S. tariffs.
The yen swung between losses and gains after the decision, turning negative during Governor Kazuo Ueda's press conference, with the dollar last up 0.25% on the yen at 145.17 yen.
The escalations between Israel and Iran have sent the price of Brent crude higher.
Elsewhere, the euro was down 0.37% at $1.1516.
The pound was last down 0.5% against the dollar at $1.3506 . Trump signed an agreement on Monday formally lowering some tariffs on imports from Britain as the countries continue working toward a formal trade deal.
The risk-sensitive Australian dollar was down 0.22% at US$0.65103. Meanwhile, against a basket of currencies, the dollar rose 0.3% to 98.49.
The Federal Reserve's policy decision on Wednesday is taking centre stage for FX market watchers. Expectations are for the central bank to keep rates on hold, though the focus will be on any guidance regarding the rate outlook.
Source: Reuters
