The U.S. retail sales grew more than forecast in July, helping underpin the U.S. dollar in the European session on Tuesday and strengthened expectations for a third rate rise this year.

Data from the Commerce Department showed that U.S. retail sales grew more than anticipated in the month of July, climbing 0.6 percent on month.

This follows a revised 0.3 percent rise in June and beat expectations for an increase of 0.4 percent.

Excluding a jump in sales by motor vehicle and parts dealers, retail sales still rose by 0.5 percent in July following a 0.1 percent uptick in June. Ex-auto sales had been expected to increase by 0.3 percent.

Data from the US Bureau of Labor Statistics showed that U.S. import prices rebounded in July, led by higher fuel prices.

The cost of imported goods steadied after declines the previous two months, rising 0.1% in July. However, stripping out volatile fuel costs, import prices were down 0.1%.

Export prices raced ahead by 0.4% last month after decreasing 0.2% in June. It was the largest monthly rise in seven months. Still, export prices are higher by only 0.8% from a year ago.

Tomorrow will see the release of FOMC minutes from the July meeting, with investors awaiting more details about the plan to start reducing the Fed's massive $4.5 trillion balance sheet. The minutes may throw more light on the Fed's plans to raise interest rate later this year.

Other major releases this week include housing starts on Wednesday, weekly jobless claims, industrial production and leading indicators on Thursday, followed by the University of Michigan's consumer sentiment on Friday.

The greenback has been trading higher against its major counterparts in the Asian session, after the New York Fed President William Dudley backed another rate hike this year.

In an interview with the Associated Press, Dudley suggested that he prefers another rate hike later this year should the economic growth continue as he expects.

The greenback strengthened to a near 3-week high of 1.1687 against the euro, after falling to 1.1793 at 9:30 pm ET. Continuation of the greenback's uptrend may see it challenging resistance around the 1.15 region.

Data from Destatis showed that German economy expanded at a slightly slower pace in the second quarter.

Gross domestic product grew 0.6 percent sequentially in the second quarter, slightly slower than the 0.7 percent expansion seen in the first quarter. The growth rate was expected to remain at 0.7 percent.

The greenback climbed to 1.2847 against the pound, its strongest since July 12. This marks a 0.9 percent increase from a low of 1.2970 hit at 9:00 pm ET. The greenback is poised to test resistance around the 1.27 mark.

Data from the Office for National Statistics showed that UK consumer prices rose at a steady pace in July.

Consumer prices climbed 2.6 percent annually in July, the same rate as seen in June. The annual growth was forecast to rise slightly to 2.7 percent.

The greenback hit an 8-day high of 110.85 against its Japanese counterpart and was up by 1 percent from Monday's closing quote of 109.65. The next possible resistance for the greenback-yen pair is seen around the 113.00 level.

Final data from the Ministry of Economy, Trade and Industry showed that Japan's industrial production rebounded more than initially estimated in June.

Industrial production climbed a seasonally adjusted 2.2 percent month-over-month in June instead of a 1.6 percent rise reported earlier. This was followed by a 3.6 percent decline in May.

The greenback bounced off to 0.9752 against the Swiss franc following the data, from a low of 0.9702 hit at 5:00 am ET. The currency is thus few pips short of its previous session's weekly high of 0.9759. On the upside, 0.99 is possibly seen as the next resistance for the greenback.

The greenback firmed to a 4-week high of 0.7811 against the aussie, near 5-week highs of 0.7244 against the kiwi and 1.2778 against the loonie, off its early lows of 0.7877, 0.7312 and 1.2718, respectively. The greenback may find resistance around 0.77 against the aussie, 0.70 against the kiwi and 1.30 against the loonie.

The U.S. business inventories for June and NAHB housing market index for August are due shortly.

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