Yields fall after soft United States inflation, retail sales data

Phillip Butler
July 16, 2017

The year-on-year CPI has been softening steadily since February, when it hit 2.7 per cent.

CPI is expected to rise 0.2 percent on a month-to-month basis after a 0.1 percent increase earlier month, a soft result may wane Fed rate hike speculation even more therefore burdening the USA dollar.

Wall Street expected a 0.1% gain in overall retail sales and a 0.2% rise ex-autos.

The dollar index against a basket of six major currencies was hovering at 95.70, within sight of its nine-month low of 95.47 plumbed at the end of June.

GBP/USD is supported in the range of 1.2952 levels and now trading at 1.3101 levels.

It is now in a range of 1 percent to 1.25 percent.

The US dollar added 0.08 percent to 1.3746 against the Singapore dollar while the Malaysian ringgit was up 0.01 percent to 4.2908.

If consensus forecasts are correct, CPI will continue to outpace the Bank of England's 2% target and will put pressure on policymakers to consider hiking rates beyond 0.25%. It has made session high at 1.2754 and lows at 1.2646 levels.

Most economists previously had expected the U.S. central bank to raise rates at its September meeting, but the odds of that fell when the disappointing data were published.

It would leave inflation at a near four-year high, as the last time inflation reached 2.9% was June 2013.

Against the Japanese yen, the greenback was down 0.62 percent to 112.57 yen, after hitting a near two-week low of 112.28 yen. It touched on Wednesday its strongest in almost 13 months at C$1.2681.

The measure of wireless phone costs fell 0.8 percent in June and is down 13.2 percent in the past year.

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.

It is unlikely in such circumstances that the Federal Reserve will vote to raise interest rates again anytime soon.

Recent comments from MPC members including Mr Carney suggest there is growing support for a rate hike. That followed a report that the European Central Bank is likely to signal in September that its asset purchase programme will be gradually wound down next year.

Their implied view fell to 47 percent shortly after the release of the latest CPI and retail sales data. That has eased concerns the Fed was raising interest rates too quickly.

Dow Jones closed up by 0.41 percent, S&P 500 ended up 0.47 percent, Nasdaq finished the day up by 0.59 percent. The drop came after the United States data raised doubts about U.S. economic growth and whether the Fed will hike rates again this year. It was the yield's largest weekly decline since the week ended June 2.

US 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 yield on the 30-year bond, or the long bond, TMUBMUSD30Y, -0.85% fell 3.1 basis points to 2.888%. While Ms. Yellen reiterated her expectation that inflation will rise over the coming years, she also said the central bank would be watching inflation data closely and could reassess its strategy if it continues to disappoint.

Oil prices held firm after strong gains on Tuesday on reports showing cuts in USA oil production and declines in US crude and European product stockpiles.

Brent crude futures, the global benchmark for oil, settled up 49 cents, or 1.01 percent, at $48.91 per barrel.U.S.

US West Texas Intermediate (WTI) crude futures rose 46 cents to settle at US$46.54 per barrel.

Other reports by Ligue1talk

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