Dollar Falls As Weak US Retail Sales, Inflation Cool Fed Rate Hopes

Dollar Falls As Weak US Retail Sales, Inflation Cool Fed Rate Hopes

Traders on Friday reduced their view the Federal Reserve would raise rates again before year-end following weaker-than-forecast data on consumer prices and retail sales in June, according to interest rates futures.

The unchanged reading followed a drop of 0.1 percent in May, the Labor Department said Friday.

Core CPI y/y came out at 1.7% as expected but all the other data figures disappointed.

Just last month, the US central bank raised interest rates for a second time in 2017, downplaying the weakening in price growth amid one-time factors.

At the same time, retail sales unexpectedly fell by 0.2 percent last month, the Commerce Department reported.

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

The benchmark 10-year U.S. Treasury note US10YT=RR rose 6/32 in price to yield 2.3248 percent. Australia's S&P/ASX 200 rose 0.3 percent to 5,751.10. The Australian dollar rose 1.22 percent to $0.7823, well on track to post its best weekly performance in four months.

The benign inflation rate "could cast doubts on the Federal Reserve's ability to increase interest rates for a third time this year", CNBC said.

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Among mid-caps, Carillion CLLN.L saw a small relief bounce from heavy losses this week, rising 1.3 percent after the crisis-hit construction and support services contractor hired HSBC as joint financial adviser and corporate broker, amid speculation it is preparing a rights issue. 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 retrenchment by Yellen has put markets on edge and as a result there will be much focus on the release of Core and Headline Inflation (CPI) and Retail Sales data this afternoon at 13.30 BST. The Japanese yen strengthened 0.65 per cent versus the greenback at 112.53 per dollar, while the Mexican peso gained 0.48 per cent and the Canadian dollar rose 0.58 per cent versus the greenback.

She said it was premature to reach the judgment that the USA is not on track to reach its target of 2 per cent inflation over the next few years.

If we look at the chart of Core inflation below it shows just how bad the inflation problem is - the chart shows core inflation in an entrenched downtrend, measured on a year-on-year basis over a five-year period.

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. It earlier fell to 2.279 percent, its lowest since June 30.

USA 10-year yield fell to 2.303 percent, from 2.348 percent late on Thursday.

Oil rose 1 percent on Friday, boosted by lower US stockpiles, a slight slowdown in USA crude production and signs of increased Chinese demand, but trading was volatile as global supply remained strong.

USA crude futures rose 1.8 per cent to $45.83 per barrel, extending their recovery from Monday's near two-week low of $43.65.

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