Dollar dips against euro as retail sales fall

NEW YORK: The US dollar weakened slightly against the euro on Monday as investors weighed a drop in US retail sales against slowing inflation in the euro zone, with central banks in both regions seen on hold in the near-term.

The Commerce Department said on Monday retail sales dropped 0.2 percent in February as households cut back on purchases of furniture, clothing, food and electronics and appliances, as well as building materials and gardening equipment.

Data for January was revised higher to show retail sales increasing 0.7 percent instead of gaining 0.2 percent as previously reported.

The dollar dipped briefly on the data before clawing back losses, though it remained 0.18 percent weaker on the day.

"People are looking at the revisions and getting a little bit of comfort from those, although I think on net the numbers are probably negative overall for the US economy," said Erik Nelson, a currency strategist at Wells Fargo in New York.

The greenback also likely has some safe haven support on the view that a weakening US economy would also result in lower stocks, which would boost the dollar, Nelson said. "That's the dynamic we've seen in the last year or so," he said.

Stronger stocks on Monday also likely reduced demand for the greenback.

The euro was mildly stronger on the day even as data showed that euro zone headline and core inflation slowed in March, supporting the European Central Bank's decision to delay a planned tightening of monetary policy.

Commodity currencies including the Australian dollar gained after Chinese factory activity grew unexpectedly for the first time in four months in March, suggesting government stimulus measures may be starting to take hold in the world's second-largest economy.

The Aussie currency (AUD=> gained 0.48 percent against the US dollar to $0.7129.

Sterling gained before Parliament was again set to try to take control of Britain's departure from the European Union, with some lawmakers hoping to force Prime Minister Theresa May to drop her Brexit strategy and pursue close economic ties with the bloc.