The US Dollar (USD) weakened against major currencies including the British Pound (GBP), Indonesian Rupiah (IDR), and Japanese Yen (JPY) as expectations for a US Federal Reserve (Fed) rate hike diminished following softer US economic data. US Retail Sales fell in July for the first time in nine months, with a 0.6% month-over-month decline, reversing June's 0.2% increase and missing the market consensus of 0.1% growth [1][2]. Annual Retail Sales growth slowed to 5.0% in July from 6.8% in June [2]. This, combined with subdued inflation and unexpected job losses, led markets to price in a 31% probability of a Fed rate hike at the September policy meeting, down from 35% immediately after the Retail Sales report and a sharp decrease from 52.2% a week ago, according to the CME FedWatch Tool [1][2].
The GBP/USD pair gained traction, trading near 1.3555 during early European hours, supported by the Bank of England's (BoE) hawkish tone. BoE Chief Economist Huw Pill cited stronger-than-expected UK economic growth of 0.4% in Q2 as reinforcing the case for higher borrowing costs to bring inflation back to target [1]. Technical analysis indicated GBP/USD maintained a bullish bias above key moving averages, with immediate resistance at 1.3595 and support at 1.3435 [1].
The Indonesian Rupiah (IDR) strengthened, with USD/IDR trading around 17,820, following President Prabowo's optimistic GDP growth target of 6% for next year, driven by investment and job creation. The government plans to retain state-owned company dividends to build a fiscal buffer and accelerate debt reduction [2]. Strategists at OCBC noted that lower Fed rate hike expectations and a steeper US yield curve have supported carry trades and demand for yield across currencies [2].
For the Japanese Yen (JPY), USD/JPY struggled near 159.00, showing resilience but lacking bearish conviction. The USD's weakness amid receding Fed rate hike expectations was a key factor, though Japan's soft Q2 GDP print complicated the Bank of Japan's policy normalization path [3]. Technical analysis suggested fading upside momentum, with immediate resistance at 159.61 and support at 158.58 [3]. The JPY was the strongest against the USD among major currencies today, appreciating by 0.16% [3].
CONCLUSION
Softer US economic data and reduced Fed rate hike expectations have led to broad USD weakness, boosting GBP, IDR, and JPY. Market sentiment is negative for the USD, with analysts highlighting supportive conditions for carry trades and constructive outlooks for other currencies. The upcoming UK employment and inflation reports, as well as further US data releases, remain key for future market direction.