2019.10.1620:35:00UTC+00Dollar Loses Ground On Weak Retail Sales Data

The U.S. dollar lost ground against most major currencies on Wednesday, as data showing an unexpected drop in retail sales in September raised prospects for a further reduction in interest rates by the Federal Reserve.

The dollar index dropped to 97.90 a little past noon and was last seen hovering around 98.00, down nearly 0.3% from previous close.

Against the Euro, the dollar weakened to 1.1075, down 0.4% from previous close.

Data from Eurostat showed Eurozone inflation eased more than initially estimated in September, slowing to 0.8%, from 1% in August. Price growth was initially estimated at 0.9%.

This was the lowest inflation since November 2016, when the rate of price growth was 0.6%.

Another data from Eurostat showed the euro area trade surplus increased in August on falling imports. The trade surplus rose to a seasonally adjusted EUR 20.3 billion in August from EUR 17.5 billion in July.

The Sterling strengthened to $1.2826, gaining about 0.33%, despite staying a bit listless amid mixed signs about the progress of Brexit talks between the U.K. and the European Union.

In Brexit news, reports in British media cited EU diplomats as claiming talks had stalled over a future trade deal and fair competition clauses.

The report said Irish Prime Minister Leo Varadkar has confirmed that disagreements surrounding Northern Ireland's relationship with the bloc has not been resolved as yet.

Meanwhile, it is reported that British Prime Minister Boris Johnson would attend the EU summit next week to try and secure a deal.

The dollar was weak against safe-haven currencies Yen and Swiss franc. It weakened to 108.77 yen, giving up about 0.1% from previous close. Against Swiss franc, the dollar eased to 0.9948, down 0.4%.

The greenback was down against the Aussie with the pair trading at 0.6761, while against the Loonie, it was up slightly at 1.3203.

On the U.S.-China trade front, a report in Wall Street Journal noted questions remain about how much U.S. agricultural products China intends to buy and the time frame for the purchases, while a Bloomberg report said China wants tariffs rolled back before it moves forward.

According to the data released by the Commerce Department, retail sales in the U.S. unexpectedly decreased in the month of September, falling by 0.3%, after climbing by an upwardly revised 0.6% in August.

The drop came as a surprise to economists, who had expected sales to rise by 0.3% compared to the 0.4% increase originally reported for the previous month.

Another report from the Commerce Department said business inventories in the U.S. came in virtually unchanged in August after climbing by a revised 0.3% in July. Economists had expected inventories to rise by 0.2% compared to the 0.4% increase originally reported for the previous month.