The US dollar continued gaining during the Asian session following yesterday’s spike versus the yen on upbeat retail sales. Sterling was also down against the greenback during morning trading, while other majors including the euro, aussie, kiwi and the Canadian dollar managed to recoup some of the losses against the US currency. The dollar index was broadly flat at 93.84.

In terms of economic data, today’s first session of the day was relatively quiet. The wage price index for the second quarter out of Australia, which came in as expected at 0.5% q/q, was the only release. During the European session, the average earnings index out of the UK will be one of the key releases at 8:30 GMT. That will be followed by the preliminary second-quarter GDP figure for the eurozone at 9:00 GMT. During the US session, housing data and crude oil inventories will dominate the news flow.

Looking at the forex reactions, the dollar continued gaining for the third consecutive day against the yen to last trade at 110.77 yen ahead of the European session. US retail sales rose 0.6% m/m in July, their biggest increase this year on a pickup in sales of motor vehicles and increased discretionary spending. Not only did the report beat economists’ expectations of 0.4%, but also showed an upward revision for the gains in the prior two months. This has provided optimism about growth in the third quarter in the US and lifted the probability of a rate hike by the Federal Reserve this year in December. Following the release, the dollar index rose to near a three-week high.

On the geopolitical front, the situation has calmed as North Korean president Kim Jong Un opted not to fire missiles at the US territory of Guam, as reported by state media.

The euro managed to recoup some of yesterday’s heavy losses against the dollar when it tumbled on disappointing German GDP numbers and strong US retail sales. The preliminary figures released yesterday showed that Germany’s economy expanded 0.8% annually, faring much worse than the expected 1.9% gain and below the upwardly revised prior figure of 3.2%. The disappointment was less on the quarterly expansion as the figures came in at 0.6% versus the 0.7% forecasted gain. Following the release of the GDP figures, the euro fell to $1.1735 and further plunged to $1.1687 after the US retail sales figures. During the Asian session, the euro was last trading at $1.1731.

Sterling slid against the dollar to an intra-day low of $1.2845 during yesterday’s session on news that inflation cooled in July, dashing hopes of an interest rate hike. Annually, the consumer price index expanded 2.6%, below the expected gain of 2.7% and in line with the prior figure of 2.6%. On a monthly basis, inflation declined by 0.1%. The pound managed to recover modestly during the Asian session, but is still down on the day and was last trading at $1.2865.

Looking at gold, the precious metal weakened in the wake of the dollar strength and was last trading at $1,269.61 an ounce.

Oil prices firmed up on hopes for a big drop in US inventories that will be released later in the US session. WTI was last trading at $47.79 a barrel while Brent was at $51.11.