Investing.com - The U.S. dollar fell against a basket of major currencies on Friday, hitting a more than one-week low as unexpectedly weak U.S. data on consumer spending and inflation led investors to dial back their expectations for the timing and pace of Federal Reserve rate hikes.
U.S. retail sales were flat in July, the Commerce Department said, disappointing forecasts for a 0.4% rise and slowing sharply from growth of 0.8% in the preceding month.
Meanwhile, the July reading of the producer price index showed a decline of 0.4%, the largest drop since September 2015 and confounding expectations of a 0.1% gain.
Other data released Friday included business inventories, which rose more than expected in June, and consumer sentiment for August, which came in below expectations.
The downbeat data led investors to push back expectations for the next U.S. rate hike. Fed funds futures are currently pricing in just a 9% chance of a rate hike by September. December odds were at around 45%.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, slumped to a more than one-week low of 95.19 in wake of the disappointing data. It was at 95.68 by late Friday, down almost 0.25% for the day and 0.5% lower on the week.
Against the yen, the dollar slumped to a low of 100.85 before trimming losses to end at 101.27 by late trade, down nearly 0.7%. For the week, the pair lost 0.5%, the third straight weekly decline.
The euro, meanwhile, climbed to a more than one-week peak of 1.1221 against the dollar before ending at 1.1161, up 0.2% on the day and 0.7% higher for the week.
Europe was also digesting its own set of data, with Germany's economy expanding 0.4% in the second quarter, which was above expectations, but below the previous quarter's figure of 0.7%.
A separate report showed that euro zone industrial production rose 0.6% in June, rebounding after a 1.2% decline the previous month and beating expectations for a 0.5% gain.
Meanwhile, the pound continued to weaken, falling to as low as 1.2904 against the greenback. GBP/USD settled at 1.2914, down 0.3% for the day and 1.15% lower for the week, amid speculation policymakers in the U.K. will be forced to add to recent stimulus measures in a bid to buffer the economy from a downturn following the Brexit vote.
Elsewhere, the Australian dollar came under pressure as market participants digested another round of disappointing Chinese economic data.
The National Bureau of Statistics reported Friday that industrial production gained 6.0% in July, below expectations for 6.1%, fixed asset investment rose 8.1%, missing forecasts for 8.8%, while retail sales increased 10.2%, a tad worse than analyst projections of 10.5%.
China is one of Australia's key trading partners and Chinese data usually impacts the Aussie.
In the week ahead, market players will be turning their attention to Wednesday’s minutes of the Federal Reserve’s July policy meeting for fresh clues on the timing of the next U.S. rate hike.
U.S. inflation data will also be in focus, as investors attempt to gauge if the world's largest economy is strong enough to withstand an increase in borrowing costs in the coming months.
Meanwhile, preliminary data on Japanese second quarter growth will also be in focus, amid concerns over recent yen strength and its implication on economic growth prospects.
Elsewhere, in the U.K., market participants will be looking ahead to reports on employment, consumer prices and retail sales for further indications on the continued effect that the Brexit decision is having on the economy.
Investors will also be eyeing a report on German business confidence for fresh signals on the health of the euro zone's biggest economy in wake of Britain's vote to exit the European Union earlier in the summer.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, August 15
Japan is to release preliminary data on second quarter economic growth.
Financial markets in Italy will be closed for a national holiday.
Switzerland is to publish data on producer prices.
The U.S.is to release a report on manufacturing activity in the New York region.
Tuesday, August 16
The Reserve Bank of Australia is to publish the minutes of its latest monetary policy meeting, giving investors insight into how officials view the economy and their policy options.
The U.K. is to produce what will be closely watched data on consumer prices.
In the euro zone, the ZEW Institute is to report on German economic sentiment.
Canada is to report on manufacturing sales.
The U.S. is to release report on building permits and housing starts, consumer prices and industrial production.
Wednesday, August 17
New Zealand is to release its quarterly employment report.
Later in the day, the U.K. is to release its monthly jobs report.
The Federal Reserve is to publish the minutes of its latest monetary policy meeting.
Thursday, August 18
Australia is to publish its monthly employment report.
The U.K. is to report on retail sales.
The euro zone is to produce revised data on consumer inflation, while the European Central Bank is to publish its monetary policy meeting minutes.
The U.S. is to report on jobless claims and manufacturing activity in the Philadelphia region.
Friday, August 19
The U.K. is to release a report on public sector borrowing.
Canada is to round up the week with reports on retail sales and consumer inflation.