Due to investors' continued concern about the debt limit, the U.S. dollar increased on Tuesday after data revealed that retail sales in April were lower than anticipated but still indicated a strong underlying trend.
With less than two weeks left until the U.S. government would run out of money to pay its debts, U.S. President Joe Biden and Republican House of Representatives Speaker Kevin McCarthy will meet later on Tuesday to attempt to reach an agreement to increase the debt limit.
McCarthy told reporters on Tuesday that his party, which now has a 222-213 advantage in the chamber, would only accept an agreement that reduced expenditure.
“Today may bring some possible news on the debt limit. The likelihood is that this will be delayed until the deadline, which is early next month, according to UBS FX analyst Vassili Serebriakov.
“Therefore, the market ought to stay in a range. There doesn't seem to be much of a guiding impulse here.
At 102.59, the dollar index was up 0.2% for the day. The US dollar increased 0.4% to 136.62 yen in relation to the yen.
Sterling dropped 0.3% to $1.2490 while the euro sank 0.1% to $1.0865 in relation to the dollar.
Although data revealed that the underlying trend remained strong, the greenback earlier increased after U.S. retail sales climbed less than anticipated in April. This indicated that early in the second quarter, consumer spending most likely remained robust.
Last month, retail sales increased 0.4%. Sales for March were down 0.7% instead of 0.6% as initially reported, according to data that was slightly revised downward. Reuters surveyed economists, who predicted that sales would increase by 0.8%.
After two weak months, “it was a rebound, suggesting that consumer spending is still holding up,” said Serebriakov.
Industrial output increased by 1% in April, above forecasts for a level reading and slightly exceeding the revised 0.8% gain in March. This is consistent with the overall positive economic outlook.
According to the sources, a rise in borrowing costs was still a possibility, even though the market generally expects the Federal Reserve to stop raising rates at its next meeting.
On Tuesday, the rate futures market raised the probability of a rate rise of 25 basis points the next month to roughly 22%. Late on Monday, it was at around 16%.
Thomas Barkin, president of the Richmond Federal Reserve, reiterated the higher-for-longer adage on Tuesday. He said that although he approves of the “optionality” reflected in the central bank's most recent policy statement, he would be “comfortable” with more interest rate increases if they were required to reduce inflation.
Over the last week, multiple Fed officials have conveyed this message.
Michael Feroli, chief U.S. economist at J.P. Morgan, stated: “While there were some mixed signals in today's different data releases, on net most were positive and early in the quarter we're continuing to monitor some upside risk to our 1.0% 1Q GDP growth prediction.
Even yet, in light of all the ominous clouds in the sky, the Fed is expected to remain on hold at its next meeting in mid-June.
Exchange rates as of 12:13 PM (16:13 GMT)
Description RIC Change in YTD Pct Last U.S. Close Low Bid High Bid
Earlier Change
Session
Dollar index: 102.6900 +0.870% +102.6900 +102.1900 102.5900 102.4300 +0.17%
Dollar/Euro Exchange Rate $1.0865 $1.0874 -0.07% +1.41% +$1.0905 +$1.0855
136.6150 yen/dollar 136.0950 +0.41% +4.23% +136.6750 +135.6800
Euro to Yen exchange rate: 148.45 148.01 +0.30% +5.81% +148.4800 +147.6200
Dollar/Swiss 0.8956 0.8956 +0.02% -3.13% +0.8970 +0.8920
$1.2490 $1.2531 -0.33% +3.28% +$1.2546 +$1.2466 Sterling/Dollar
Dollar/Canadian 1.3461 1.3466 -0.04% -0.66% +1.3493 +1.3405
Australian dollar: $0.6658; US dollar: $0.6700; plus $0.670; plus $0.665
Euro/Swiss 0.9730 0.9739 -0.09% -1.67% +0.9742 +0.9720
Sterling/Euro exchange rate: 0.8697 0.8678 +0.22% -1.66% +0.8718 +0.8680
NZ $0.6235 $0.6243 -0.11% -1.80% +$0.6260 +$0.6224
Dollar/Dollar
Dollar/Norway 10.7180 10.6000 +1.18% +9.28% +10.7290 +10.5930
Euro/Norway 11.6465 11.5214 +1.09% +10.99% +11.6542 +11.5195
Dollar/Sweden 10.4104 10.3480 +0.55% +0.03% +10.4251 +10.3188
Euro/Sweden 11.3073 11.2454 +0.55% +1.41% +11.3197 +11.2411
