FOREX-Dollar firms as weak China retail sales sound warning

* China Q/Q GDP +3.2% vs +2.5% f'casts, but June retail
sales drop
* AUD slips back into range trading
* ECB meeting at 1145 GMT eyed
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Tom Westbrook
SINGAPORE, July 16 (Reuters) - The dollar found support on
Thursday as simmering Sino-U.S. tensions and weak Chinese
consumption data knocked investors' faith in a fairly swift
global economic recovery from the coronavirus crisis.
China's 3.2% economic growth last quarter easily beat market
expectations for 2.5%. But an unexpected drop in retail sales -
for a fifth straight month - was an unwelcome harbinger of
possible problems ahead for the rest of the world as more
countries relax lockdowns and allow businesses to
reopen. The growth-sensitive Australian dollar slipped under 70
cents after the data, and the greenback clambered off an
overnight one-month low against a basket of currencies =USD .
"While in general it's fair to say that the numbers beat
expectations, what the numbers also reveal is that we're seeing
that the China consumer remains behind," said National Australia
Bank FX analyst Rodrigo Catril in Sydney.
"That cautiousness is something the market is looking at in
terms of countries where the consumer plays a bigger role, so
that's obviously relevant for the U.S. as well."
The Aussie AUD=D3 was last down 0.3% at $0.6988, the kiwi
NZD=D3 0.2% softer at $0.6557 and the Chinese yuan CNH= fell
off a four-month high in offshore trade to 6.9962 per dollar.
Surging U.S. virus cases also dampened sentiment and weighed
on equity markets as focus shifts to Europe, and the region's
recovery plans, as well as rising global tensions. MKTS/GLOB
Britain on Wednesday ordered that equipment from China's
Huawei be purged from its communications network by 2027,
prompting a warning from Beijing, while China and the U.S. are
at loggerheads over issues from trade to technology.
President Donald Trump has not ruled out additional
sanctions on top Chinese officials over Beijing's crackdown in
Hong Kong, a White House spokesman said on Tuesday. New York Times also reported his administration is
considering a sweeping ban on travel to the United States by
Chinese Communist Party members, citing four unnamed people with
knowledge of such discussions. AT THE CROSSROADS
The cautious drift in markets recoups some of the dollar's
losses this week as investors had cheered promising progress
toward a coronavirus vaccine, pulling most of the majors back
toward the ranges they have marked for more than a month.
"The broad dollar is at a crossroads," said OCBC FX
strategist Terence Wu. It is under pressure, but its near-term
fate, he said, rests with the euro and the outcome of today's
European Central Bank meeting and the weekend's EU Summit.
The euro EUR= has pulled back from a four-month top hit
overnight, but remained supported in Asia at $1.1402.
The ECB is all but certain to keep policy on hold on
Thursday, which would keep pressure on political leaders to
agree on a recovery plan at a Friday-Saturday conference in
Brussels. Any deal requires bridging a gap between wealthy, thrifty
northern countries and the high-debt south that has taken the
brunt of the COVID crisis.
The ECB delivers its decision at 1145 GMT, which will be
followed by ECB President Christine Lagarde's press conference
at 1230 GMT.
"In our view, the euro can sustain its move beyond $1.1400
if all EU leaders agree on the proposed EU-wide recovery fund,"
said Commonwealth Bank of Australia FX analyst Kim Mundy.
Elsewhere, the pound GBP=D3 dipped 0.2% with the broader
mood to $1.2557, but the safe-haven Swiss franc CHF= was kept
under pressure, suggesting investors are not willing to totally
abandon their optimism just yet.
The Norwegian krone NOK=D3 slipped from a one-month high
as oil prices eased. The Indonesian rupiah IDR= was under
pressure at a month low ahead of a central bank meeting, where
just over half of 26 analysts polled by Reuters expect a cut.
A decision is due around 0700 GMT.