US Dollar Holds Onto Gains as Retail Spending Hits 6 Month High

The US dollar advanced across the board on the back of better-than-expected sales data, and led the greenback to pick up the biggest gains against the Australian dollar. As a result, the New Zealand and Canadian dollar caved against the reserve currency to trade at 0.934 and 1.02, respectively. On the other side of the spectrum, the low yield Swiss franc dropped nearly 100bp to hold off at 1.04 against the greenback, and was followed by the Japanese yen as the USD/JPY pair rose to test 108. Against the European currencies, the euro retraced back into the 1.54 range, while the British pound tested for support at 1.94.
Upbeat sales data spurred early morning gains in the stock markets, but trailed lower towards the afternoon as oil prices inched higher. As a result, the DJIA rose 59.27 points to 12,143.04 points, with Caterpillar and United Technologies leading the winnings board. Among the broader indices, the S&P500 picked up 4.38 points to hold off at 1,339.87 points amid 352 stocks falling to a new 52 week low.
The unexpected rise in sales spurred bets that the Fed may have some room to hike the benchmark interest rate at their next meeting, and sent the benchmark 10-Year yield to a new 2008 high. As a result, the 10-Year yield surged to 4.217 percent from 4.079 percent, while the 2-Year yield jumped to 3.046 percent from 2.818 percent.
Looking ahead, the consumer price index release will be the main event risk for the US dollar as market participants forecast the headline figure to hold at 3.9 percent, while the June preliminary reading for the U. of Michigan confidence index may present downside risks for the greenback as economists forecast the index to inch lower to 59.5 from 59.8.