Dollar rises on upbeat retail sales data, euro falls

NEW YORK: The dollar rose against a basket of currencies on Tuesday as surprisingly strong growth in US retail sales in June soothed jitters about the American economy and trimmed expectations the Federal Reserve may embark on a deep interest rate cut later this month.

The greenback strengthened versus the euro due to data that pointed to a deterioration in confidence among German investors prompted by the trade conflict between China and the United States and political tensions with Iran.

The British pound fell to six-month lows against the euro and a 27-month trough versus the dollar as Conservative Party members Boris Johnson and Jeremy Hunt, vying to be Britain's next prime minister, were seen to be toughening their line on Brexit negotiations. Investors are worried about the rising risk of a no-deal exit from the European Union.

"An improved US economic outlook should provide some fuel for further dollar gains," said Win Thin, global head of currency strategy at Brown Brothers Harriman & Co.

At 10:44 a.m. (1444 GMT), an index that tracks the dollar against a group of six currencies was up 0.39% at 97.312 after touching 97.361, the highest in four sessions.

Recent US economic data have on balance beat expectations. Concerns about the drag from global trade disputes and sluggish inflation among developed economies, however, have led policymakers to consider cutting interest rates and/or embarking on bond purchases to boost investor confidence and business activities.

The US Commerce Department said retail sales rose 0.4% in June, exceeding the 0.1% increase forecast among analysts polled by Reuters.

Last week, Fed Chairman Jerome Powell hinted in testimonies before Congress that the central bank was ready to "act as appropriate" to support the current US expansion, which is the longest on record.

US interest rate futures implied traders fully expect the Fed to lower key lending rates by at least a quarter point at its July 30-31 policy meeting, according to CME Group's FedWatch program.

Traders also expect the European Central Bank to move policy rates deeper into negative later this year as the euro zone economy has been struggling.

Earlier Tuesday, the ZEW Institute said its monthly survey showed economic sentiment among German investors fell to -24.5 in July from -21.1 the month before.

The euro was down 0.38% at $1.1215 and 0.09% lower at 121.35 yen.

The single currency, however, was up 0.54% at 90.43 pence after touching a six-month peak at 90.43 earlier Tuesday.

Sterling fell below $1.24 for the first time since April 2017. It was 0.91% lower at $1.2403.