New York foreign exchange market: The USD fell to a new low for the year as weak retail sales data reignited expectations for an interest rate cut.
The Bloomberg USD index fell to a new low for the year on Friday, as weak retail sales data from the USA prompted traders to rebet on the Federal Reserve cutting rates before September. Due to ongoing uncertainty surrounding tariff policies, the USD has declined for the second consecutive week. The Bloomberg USD spot index briefly dropped 0.5%, marking its lowest point since December 12; however, the downward trend was later curtailed. Retail sales in the USA saw their largest drop in nearly two years in January, indicating a shift in Consumer behavior from the positive spending trend observed at the end of last year. This report will lead to a repricing of expectations for the Fed's rate cuts this year, but the market should not "panic" over one bad reading, according to Brown.
The British Pound has risen to a 2025 high, with most market participants believing the United Kingdom will not become a target of USA tariffs.
The British Pound has risen to its highest level against the US Dollar this year, as traders cover short positions established during the decline in January. The British Pound has increased by 0.2% to 1.2596, marking the highest level since December 30. Over the past month, the British Pound has cumulatively risen by more than 4%, after briefly dipping to 1.21 USD. The British Pound is basically flat against the Euro. Most major currencies strengthened against the US Dollar on Friday, following optimistic sentiment sparked by US President Donald Trump’s latest news on trade tariffs, with markets believing that the implementation of tariffs will take longer than expected. Most market participants believe that the United Kingdom will not be a target at all.
After the inflation panic, the 10-year U.S. Treasury bond stabilized at 4.50%. The next factor affecting the market is the retail data coming out tonight.
After a turbulent week, USA Treasury prices stabilized on Friday, as traders faced the reality that another interest rate cut might still be a long way off.
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