July retail sales fell 0.6% versus a 0.1% gain forecast, while August consumer sentiment missed estimates at 51, triggering the Dollar Index’s decline.
The Dollar Index broke below 99.50 on Friday after July retail sales contracted 0.6%, missing the 0.1% gain consensus. August consumer sentiment also disappointed, landing at 51 against a 54.5 forecast, eroding support for the currency.
Prior data—including a July payroll contraction, cooler consumer prices, and flat producer prices—had kept the index within a tight range. The resilience of consumer spending had been the last argument for potential Fed tightening, but Friday’s figures removed that rationale.
Futures now price a 31% chance of a September rate hike, down from near-even odds a week ago. The two-year Treasury yield briefly dipped below 4.10%, its lowest since June 30, reflecting shifting expectations.