Dollar Loses Ground in Thin Trade Amid Soft US Data

The US dollar suffered in thin trade after soft Retail Sales and UoM data releases. Despite the weakness, money market pricing showed little change, indicating that rate expectations rather than fresh information drove the dollar's movement. The FX move is expected to fade as it lacks conviction due to second-tier data. Meanwhile, USD/JPY saw two-way trade following source reporting on a potential near-term BoJ hike.

The BoJ's decision has created an asymmetry in pricing around a high probability of a September rate increase, leaving the market vulnerable to disappointment. The next catalysts are the calendar heavyweights, with desks waiting for further sourced stories, BoJ board commentary, and Japanese data releases.