News Worms
News Worms


US CPI and retail sales data miss knock the dollar down

US CPI and retail sales data miss knock the dollar down

The US dollar weakened and government bond yields fell to multi-week lows yesterday after a benign reading of US inflation in June and soft retail demand raised doubts the Federal Reserve would increase interest rates later this year.

The Labor Department said its consumer price index was flat in June after edging down by 0.1% in May.

Excluding the volatile food and energy categories, prices rose 0.1 percent in June and 1.7 percent from a year earlier.

The dollar was little changed against a group of peers early on Friday, as currency investors remained cautious ahead of US inflation data due later in the session, which is expected to set the greenback´s near-term direction.

Adding to the downward pressure on yields Friday was a report from the Commerce Department that retail sales fell 0.2% in June from the prior month.

"This cements the weaker trend in the dollar and lower USA yields and I think this story has got legs", Franulovich said.

USA two-year yields slid as well, down to 1.339 percent, from Thursday's 1.367 percent, after sliding to a three-week trough of 1.323 percent. The British pound rose sharply against the greenback on Friday, climbing more than 1 percent after data further undermined expectations for more hikes in USA interest rates.

USA interest rates futures rose as traders pared their view the Fed would increase rates again in 2017.

It is now in a range of 1 percent to 1.25 percent. "The bigger market-wide events are rate decisions out of Europe and Japan along with an updated inflation print out of the United Kingdom; and this will likely be where the bulk of market participants" attention remains.

She said it was premature to reach the judgment that the United States is not on track to reach its target of 2 per cent inflation over the next few years. Electricity costs slid 0.6 percent.

The greenback declined against the yen by 0.06 percent to 113.22 and still a bit far from reaching a four-month peak of 114.49 hit on Tuesday.

In her House comments, Yellen discussed the possibility that a recent slowdown in inflation could persist longer than the Fed expects. The Fed is now expected to raise interest rates once more this year, most likely in December, and announce plans to start reducing its roughly $4.5 trillion balance sheet following years of US Treasury and Mortgage Backed Securities purchases. The Dow rose 0.1 percent to 21,553.09.

US 10-year yield fell to 2.303 percent, from 2.348 percent late on Thursday. The negative momentum following Fed Chair Janet Yellen's dovish remarks in her two-day testimony to Congress deepened today. It earlier fell to 2.279 percent, its lowest since June 30. The contract gained 59 cents, or 1.3 percent, to settle at $46.08 per barrel on Thursday.

Ten of the 11 major S&P sectors rose, with information technology .SPLRCT up 0.89 percent to lead the advancers.

OIL: Benchmark U.S. crude gained 7 cents to $46.15 per barrel in electronic trading on New York Mercantile Exchange.

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