Dollar broadly higher after U.S. retail data

The dollar was broadly higher against the other major currencies on Tuesday after data showed that U.S. retail sales rose for the fourth successive month in July.

During U.S. morning trade, the dollar extended gains against the yen, with USD/JPY advancing 1.32% to 98.17.

The Commerce Department said core retail sales, which exclude automobile sales, rose at the fastest pace in seven months, climbing 0.5% compared to forecasts for a 0.4% gain.

Overall retail sales rose by a seasonally adjusted 0.2% last month, slightly below expectations for a 0.3% increase. Retail sales figures for June were revised up to a 0.6% gain from a previously reported increase of 0.4% the report said.

The data reinforced the view that the economic recovery is strong enough for the Federal Reserve to begin phasing out its asset purchase program later this year.

The yen weakened across the board earlier Tuesday following reports that Japan’s Prime Minister Shinzo Abe is looking at lowering the corporate tax rate as a way to offset a planned increase in sales tax.

Elsewhere, the dollar hit one-week highs against the euro, with EUR/USDdown 0.45% to 1.3240. 

The euro briefly touched session highs earlier after a report showed that the closely watched ZEW index of German economic sentiment rose to a five-month high of 42.0 in August from July’s reading of 36.3. Economists had forecast a reading of 40.0.

The index of economic expectations for the euro zone was also higher, increasing to 44.0, the highest since April 2010, up from 32.8 in July.

The dollar was almost unchanged against sterling, with GBP/USDdipping 0.01% to 1.5462. 

Official data on Tuesday showed that the rate of consumer inflation in the U.K. eased in line with forecasts in July. The Office for National Statistics said consumer price inflation ticked down to 2.8% on a year-over-year basis, in line with economists’ expectations, from 2.9% in June.

Investors were looking ahead to U.K. employment data on Wednesday after the Bank of England announced plans last week to keep interest rates on hold at record lows as long as the U.K. unemployment rate remains above 7%.

The dollar extended gains against the Swiss franc, with USD/CHFjumping 0.92% to 0.9344.

The greenback was broadly higher against its Australian, New Zealand and Canadian counterparts, with AUD/USD down 0.72% to 0.9082,NZD/USD dropping 0.90% to trade at 0.7937 and USD/CAD climbing 0.41% to 1.0346.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.59% to 81.90.

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Natural gas futures inch lower after Monday’s rally

Natural gas futures edged mildly lower on Tuesday, as investors were hesitant to drive prices higher one day after futures notched the biggest one-day gain in nearly a month.

Traders continued to focus on near-term weather forecasts to gauge the strength of demand for the fuel.

On the New York Mercantile Exchange, natural gas futures for delivery in September traded at USD3.300 per million British thermal units during U.S. morning trade, down 0.3%.

Nymex gas futures held in a range between USD3.265 per million British thermal units, the daily low and a session high of USD3.334 per million British thermal units.

The September contract settled up 2.5% at USD3.310 per million British thermal units on Monday, after forecasts for late August turned warmer, boosting near-term demand expectations for the heating fuel.

Forecasts originally called for mild summer weather during the period.

Updated weather forecasting models pointed to hotter-than-normal temperatures in the northern tier of the U.S. from August 17 through August 26, boosting summer cooling demand for the fuel.

Demand for natural gas tends to fluctuate in the summer based on hot weather and air conditioning use.

The September contract has lost nearly 14% over the past three weeks, the biggest three-week drop in eight months, amid concerns over rising inventories and lingering below normal temperatures in the key Midwest and Eastern U.S. markets.

Total U.S. natural gas storage stood at 2.941 trillion cubic feet as of last week, 0.7% above the five-year average and rising to a surplus for the first time since March.

Early injection estimates for this week’s storage data range from 62 billion cubic feet to 77 billion cubic feet, compared to a 20 billion cubic feet increase during the same week a year earlier.

The five-year average for the week is a build of 42 billion cubic feet.

Elsewhere on the NYMEX, light sweet crude oil futures for delivery in September shed 0.3% to trade at USD105.77 a barrel, while heating oil for September delivery added 0.7% to trade at USD3.041 per gallon.

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Forex - GBP/USD steady after U.S. retail sales data

The pound was almost unchanged against the dollar on Tuesday after official data showed that U.S. core retail sales rose at the fastest pace in seven months in July.  

GBP/USD hit 1.5434 during European afternoon trade, the session low; the pair subsequently consolidated at 1.5462, edging up 0.01%.

Cable was likely to find support at 1.5380 and resistance at 1.5520, Monday’s high.

The Commerce Department said U.S. core retail sales, which exclude automobile sales, rose 0.5% in July, compared to forecasts for a 0.4% increase. Core retail sales for June were revised up to 0.1% from a flat reading.

Overall retail sales rose by a seasonally adjusted 0.2% last month, just short of expectations for a 0.3% increase. Retail sales figures for June were revised up to a 0.6% gain from a previously reported increase of 0.4% the report said.

The data reinforced the view that the economic recovery is strong enough for the Federal Reserve to begin phasing out its asset purchase program later this year.

Earlier Tuesday, official data showed that the rate of consumer inflation in the U.K. eased in line with forecasts in July.

The Office for National Statistics said consumer price inflation ticked down to 2.8% on a year-over-year basis, in line with economists’ expectations, from 2.9% in June.

Core CPI, which excludes food, energy, alcohol, and tobacco costs rose by a seasonally adjusted 2% in July, below expectations for a 2.3% increase.

Investors were looking ahead to U.K. employment data on Wednesday after the Bank of England announced plans last week to keep interest rates on hold at record lows as long as the U.K. unemployment rate remains above 7%.

Sterling moved higher against the euro, with EUR/GBP down 0.41% to 0.8566.

In the euro zone, a report on Tuesday showed that the closely watched ZEW index of German economic sentiment rose to a five-month high of 42.0 in August from July’s reading of 36.3. Economists had forecast a reading of 40.0.

The index of economic expectations for the euro zone was also higher, increasing to 44.0, the highest since April 2010, up from 32.8 in July.

A separate report showed that industrial production in the euro zone rose 0.3% in June from a year earlier, more than expectations for a 0.2% increase.

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Forex - Euro hits 1-week lows vs. stronger dollar

The euro fell to one-week lows against the broadly stronger dollar on Tuesday as U.S. retail sales data reinforced the view that the Federal Reserve will soon start to phase out its stimulus program.

EUR/USD hit 1.3236 during U.S. morning trade, the lowest since August 5; the pair subsequently consolidated at 1.3240, shedding 0.44%.

The pair was likely to find support at 1.3187, the low of August 7 and resistance at 1.3300.

The Commerce Department said U.S. core retail sales, which exclude automobile sales, rose 0.5% in July, compared to forecasts for a 0.4% increase. Core retail sales for June were revised up to 0.1% from a flat reading.

Overall retail sales rose by a seasonally adjusted 0.2% last month, just short of expectations for a 0.3% increase. Retail sales figures for June were revised up to a 0.6% gain from a previously reported increase of 0.4% the report said.

The euro briefly touched session highs earlier Tuesday after a report showed that the closely watched ZEW index of German economic sentiment rose to a five-month high of 42.0 in August from July’s reading of 36.3. Economists had forecast a reading of 40.0.

The index of the current economic situation for Germany rose to a one-year high of 18.7.

Meanwhile, the index of economic expectations for the euro zone was also higher, increasing to 44.0, the highest since April 2010, up from 32.8 in July.

The report said the first signs of an end to the recession in major euro zone countries had contributed to the increase.

A separate report showed that industrial production in the euro zone rose 0.3% in June from a year earlier, more than expectations for a 0.2% increase.

Elsewhere, the euro was higher against the weaker yen, with EUR/JPYadvancing 0.75% to 129.84.

The yen came under broad selling pressure following reports that Japan’s Prime Minister Shinzo Abe is looking at lowering the corporate tax rate as a way to offset a planned increase in sales tax.

The single currency was weaker against the pound, with EUR/GBP down 0.46% to 0.8566.

In the U.K., official data on Tuesday showed that the rate of consumer inflation eased down to 2.8% on a year-over-year basis in July, in line with economists’ expectations, from 2.9% in June.

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Crude oil futures fall to session low as dollar gains on retail sales

Crude oil futures fell to the lowest levels of the session on Tuesday, as the U.S. dollar strengthened across the board after official data showed that U.S. core retail sales rose at the fastest pace in seven months in July.

Market players also looked ahead to the release of key U.S. weekly supply data to gauge the strength of oil demand from the world’s largest consumer.

On the New York Mercantile Exchange, light sweet crude futures for delivery in September traded at USD105.93 a barrel during U.S. morning trade, down 0.15%.

Nymex oil futures rose by as much as 1% earlier in the session to hit a daily high of USD107.19 a barrel, the strongest level since August 6.

The September contract settled up 0.15% at USD106.11 a barrel on Monday.

Oil futures were likely to find support at USD103.63 a barrel, the low from August 9 and resistance at USD107.23 a barrel, the high from August 6.

The Commerce Department said core retail sales, which exclude automobile sales, rose 0.5% in July, compared to forecasts for a 0.4% increase.

Core retail sales for June were revised up to 0.1% from a flat reading.

Overall retail sales rose by a seasonally adjusted 0.2% last month, missing expectations for a 0.3% increase. 

Retail sales figures for June were revised up to a 0.6% gain from a previously reported increase of 0.4% the report said.

The data added to the view that the economic recovery is strong enough for the Fed to begin phasing out its asset purchase program later this year.

Investors have closely been looking out for U.S. data reports recently to gauge if they will strengthen or weaken the case for the Fed to reduce its bond purchases.

Any improvement in the U.S. economy was likely to reinforce the view that the central bank will begin to taper its bond purchase program in the coming months.

The Fed’s stimulus program is viewed by many investors as a key driver in boosting the price of commodities as it tends to depress the value of the dollar.

The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.5% to trade at 81.84.

A stronger dollar makes U.S. commodities more expensive for importers holding other currencies such as yen or euro.

Oil traders now looked ahead to the release of fresh weekly information on U.S. stockpiles of crude and refined products to gauge the strength of oil demand in the world’s largest oil consumer. 

The American Petroleum Institute will release its inventories report later in the day, while Wednesday’s government report could show crude stockpiles fell by 1.5 million barrels.

Elsewhere, on the ICE Futures Exchange, Brent oil futures for September delivery inched up 0.25% to trade at USD109.24 a barrel, with the spread between the Brent and crude contracts standing at USD3.31 a barrel.

Brent futures were supported amid renewed concerns over a disruption to supplies from Libya, where striking security guards reimposed a two-week-old shutdown at the country’s two biggest crude export terminals.

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