The sterling following a weaker-than-expected UK retail sales report, dampening expectations for one more rate hike by the Bank of England within this year. The currency fell off a fresh 26-year high at 2.0546 against the dollar set yesterday to below 2.05 level. UK retail sales fell from 0.4% to 0.2% in June, falling short of a call for a 0.3% growth. The year on year retail sales growth rate was down from 3.9% to 3.4%.
The dollar remained under pressure after Fed Chairman Ben Bernanke stated the negative impact of housing issues may get worse and last longer than expected in the testimony yesterday. He today said yen weakness largely reflects Japan low interest rates. He added that he does not advocate any policy change by the Bank of Japan. Carry trades will continue to be favored as the BOJ keep its interest rates at the lowest level among all industrial countries.
Like yesterday, the dollar was little impacted by any single economic data. US weekly jobless claims fell 7k to 301k, slightly better than the estimate of 311k. US leading indicators unexpectedly rose 0.3%, versus a forecast of 0.0%. Philadelphia Fed business activity index came out at 9.2, below the estimate of 13.3.
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