US retail sales slowdown but recovery expected

US 'core' retail sales growth has slowed, on a 3-month basis, to 3.9% (3.4% y/y on the month), which adjusted for inflation is around 2 ½%. Not a disaster, more a return to the trundling growth rate of 2012-2104 than anything scarier. But it is more consistent with a 'new normal' tepid recovery in which households are more interested in repairing balance sheets than conspicuous consumption. 
The data won't have much impact on market expectations of the timing of the first rate hike (September is still a good bet) but expectations about pace thereafter can take another bash, until or unless we get stronger data. There's not much here to support the dollar and longs have been squeezed further. With only claims data and PPI today, no changed is expected in the tone.
The soft US data initially gave equities and emerging/high-beta currencies a big lift. But the risk rally hit a brick wall in the face of renewed selling of bonds. The further rise in Bund yields is keeping EUR/USD bid and the short-term correlation between the Bund/Treasury spread and EUR/USD remains strong. Until Bund yields peak, we can't think about calling a top in the Euro, says Societe Generale. 
The winners though, should continue to be currencies around the edge of the Euro Area - i.e., SEK, NOK in G10, and CEE currencies. The Bund/Treasury move 'justifies' or at least helps explain the move in EUR/USD pretty well, but Gilts/Treasuries doesn't justify the latest GBP/USD spike.