SINGAPORE, June 19 Reuters The dollar recovered some ground on Wednesday after soft U.S. retail sales data reinforced bets of imminent Federal Reserve rate cuts, while sterling dipped ahead of a reading on UK inflation due later in the day.

U.S. retail sales barely rose in May and data for the prior month was revised considerably lower, data showed on Tuesday, suggesting that economic activity remained lacklustre in the second quarter.

That knocked the greenback lower in the immediate aftermath, though its losses were limited against a basket of currencies as the euro, which holds the largest weight in the dollar index , continues to be weighed down by political jitters in France and the wider bloc.

The euro was last marginally lower at 1.0736, while the dollar index steadied at 105.28.

We thought that the U.S. retail sales would be weak, and it was, said Joseph Capurso, head of international and sustainable economics at Commonwealth Bank of Australia CBA.

Things are finally deteriorating. It looked like the U.S. consumer was never going to slow down, but looks like that39;s exactly what happened now.

Markets are now pricing in a 67 chance the Fed will begin easing rates in September, according to the CME FedWatch tool, with nearly 50 basis points worth of cuts priced in for the rest of the year.

Sterling fell 0.02 to 1.2706 ahead of UK inflation data later on Wednesday, which comes before a policy decision by the Bank of England BoE on Thursday, where rates are…