Inflation and retail sales data improve US dollar sentiment

Both the inflation on month and headline inflation rose 0.1 percentage point in July to 0.1% and 1.7% respectively. Retail sales rose to 0.6% on month from 0.3% in June with a 4.2% increase from a year ago compared to upwardly revised 3.4% in June. Increases in export and import prices in July were also positive developments together with increase in business inventories. Investors cut their net short dollar position as data pointed to continued expansion of US economy. As is evident from the Sentiment table, sentiment improved for Japanese yen, Australian dollar and Swiss frank. And the euro, Canadian and Australian dollars remain the three major currencies held net long against the US dollar.

The euro bullish sentiment weakened considerably as data showed euro-zone economy slowed unexpectedly in June with industrial production contracting 0.6% on month and German GDP growth in second quarter slowing to 0.6% on quarter from 0.7%. The net long euro position fell $2.13bn to $11.63bn. Investors cut the gross longs and built shorts by 10895 and 3513 contracts respectively. The British Pound sentiment deteriorated as the trade deficit widened in June and consumer price index fell 0.1% on month in July. The net short position in British Pound widened $0.52bn to $2.56bn as investors built both the gross longs and shorts by 5193 and 11893 contracts respectively. The bearish Japanese yen moderated considerably as the GDP growth accelerated in the second quarter to 1% from 0.3%. The net short position in yen narrowed $2.1bn to $8.76bn. Investors built the gross longs and covered shorts by 3498 and 14823 contracts respectively.

The Canadian dollar sentiment deteriorated significantly as building permits and new housing prices slowed their growth in June and July. The net long Canadian dollar position fell $0.93bn to $4.03bn. Investors cut both the gross longs and shorts. The Australian dollar sentiment improved as the net longs rose by $72 million to $4.66bn. Investors built the gross longs and covered shorts. The sentiment toward the Swiss franc improved slightly as the net shorts narrowed by $28 million to $152 million. Investors cut both the gross longs and shorts.