Another jump in coronavirus infections has forced California and other states to shut down again, raising fears the U.S. economy and labor market will continue to suffer.

Retail sales in June increased for the second consecutive month, according to a report from the Commerce Department. But the resurgence in new COVID-19 cases is chipping at the budding recovery, keeping 32 million Americans on unemployment benefits, according to a separate report from the Labor Department on Thursday.

The U.S. dollar index <=USD>, which measures the currency against a basket of six rivals, was last up 0.35% at 96.350.

The three major U.S. stock indexes were all in the red on the day, with the S&P 500 last down 0.42%.

"The data in general was pretty constructive on U.S. retail sales. I think however that for foreign exchange, things haven't really changed," said Mazen Issa, senior foreign exchange strategist at TD Securities.

That is, he explained, because since the bottom in the stock market on March 23, foreign exchange markets have been highly correlated with equities.

"The data in and of itself hasn't been a focal point for currency markets, it has really been about risk asset performance. And that has been motivated by the notion that as poor as the data may be in future months, that you have a fiscal and monetary backstop. There is a lot of faith being placed in central banks and the collapse in forex volatility has been reflective of that."

The euro was slightly softer in afternoon trade, last trading down 0.28% at $1.138 ahead of an EU summit beginning Friday, at which European countries are expected to vote on a 750 billion euro ($856 billion) recovery fund to revive growth in the bloc.

Even if the financing package the EU agrees on is smaller than what is currently on the negotiating table, analysts said the dollar may nevertheless continue to weaken against the euro.

"While (Europe has) had their troubles, they're in a much better position to rebound than the United States. And I don't mean equity markets, I mean the real economy. And that's another reason it's justified that the dollar is weakening overall," said John Doyle, vice president of dealing and trading at Tempus Inc.

(Reporting by Kate Duguid in New York and Olga Cotaga in London; Editing by Bernadette Baum and Jonathan Oatis)

By Kate Duguid