US FX WRAP: Dollar loses out in thin trade after soft Retail Sales and UoM while USD/JPY sees two-way trade

The Dollar Index was lower vs. G10 FX peers, albeit in very light newsflow, as disappointing retail sales and prelim UoM for August did little to move the needle. The data did little to impact markets despite the weakness, with money market pricing little changed on the day. Participants are still pricing in a hold with more certainty than a hike following last week's NFP report and soft/in line inflation prints.

All G10 FX saw gains to varying degrees against the Greenback, with the Kiwi and CAD the outperformers and the Yen and Swissy the relative laggards. For the former, it saw choppy price action after another BoJ source said the bank was set to raise interest rates as soon as September. Regarding the BoJ, money markets assign a roughly 80% probability of a 25bps hike in September.

As mentioned, the Kiwi was the best perfomer and pared losses following Thursday's soft inflation expectations survey. Overall, and to avoid sounding like a broken record, currency specific newsflow was thin in summer trading conditions as desks await the next catalyst.