July retail sales fell 0.6%, missing forecasts, fueling concerns over US economic growth and reducing Fed rate hike expectations.
The dollar slid after US retail sales dropped 0.6% in July, defying expectations for a 0.1% increase. The decline followed a 0.2% gain in June and marked the first contraction in four months, signaling weaker consumer demand.
Economists had anticipated modest growth, but softer inflation data and a weaker labor market report earlier this week had already dampened expectations for Federal Reserve action. Markets now see a 31% chance of a September rate hike, down from previous estimates, with a 64% probability of an increase by December.
The dollar index fell 0.33% to 99.59, while the euro rose 0.36% to $1.1568. The yen also strengthened, though it remained on track for a weekly decline as intervention effects waned.