The dollar fell to its lowest level since May amid an unexpected decline in U.S. retail sales

The dollar fell to its lowest level since May following an unexpected drop in U.S. retail sales—the first in nine months. This data prompted traders to further lower their expectations for an interest rate hike this year, according to Bloomberg.

The Bloomberg Dollar Spot Index was down 0.49% at one point on Friday. The ICE U.S. Dollar Index, which measures the value of the U.S. currency against a basket of currencies including the yen and the euro, fell 0.5%. The euro rose 0.36% on Friday to 1.156 per dollar, according to Reuters. The Japanese yen strengthened against the dollar by 0.32% to 158.97 per dollar.

In July, retail sales fell by 0.6% after rising 0.2% in June, according to data from the U.S. Census Bureau. The decline was the first since October 2025 and the largest in 14 months, Reuters noted. Economists surveyed by the agency had forecast a 0.1% increase in retail sales, which primarily consist of goods and are not adjusted for inflation.

Following the release of the statistics, bond market participants reduced their odds that the Federal Reserve would raise borrowing costs in 2026 to 30%. The day before, traders’ confidence stood at 40%. Bloomberg notes that in recent months, it has been expectations of tighter monetary policy that have supported the dollar.

In addition, consumer and producer inflation data released this week came in weaker than expected. Concerns about the labor market also intensified after the July jobs report showed that employers had unexpectedly cut jobs.

"We're clearly seeing signs of weak consumer spending," Juan Perez, director of trading at Monex USA in Washington, told Reuters. "These figures clearly show that the U.S. economy is slowing down."

This article was AI-translated and verified by a human editor