Dollar, bond yields dip amid benign U.S. inflation data

by Susie Olson July 16, 2017, 0:36
Dollar, bond yields dip amid benign U.S. inflation data

It's premature to reach the judgment that we're not on the path to 2 percent inflation over the next couple of years.

The continued drop in sales surprised economists, who had expected sales to inch up by 0.1% compared to the 0.3% decrease originally reported for the previous month.

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 fell short of market expectations of a 0.1% increase. After a rough start to the week driven by poor British economic numbers, the pound is now up nearly half a percent in trade-weighted terms, riding out a series of negative headlines on Brexit negotiations with the European Union. The Russell 2000 index of smaller-company stocks inched up 0.1 percent to 1,425.66.

The trade-weighted index rose to 78.18 from 77.91 late yesterday.

Peter Boockvar, chief market analysts for the Lindsey Group, sees the central bank "backing off somewhat from hiking rates in September". It has made session high at 1.2754 and lows at 1.2646 levels.

USA equities notched new record highs on Friday - but perhaps not for the reasons many investors think. If the Fed's assessment that the softness in CPI between February and May is transitory, the Fed will go ahead with its plan. Prices of oil, one of Canada's major exports, climbed and were on track for solid weekly gains following positive demand signals, production issues in Nigeria and a reported decline in inventory.

After having advanced to a 2-day high of 113.58 against the Japanese yen at 9:00 pm ET, the greenback hit an 11-day low of 112.27. The currency traded in a range of C$1.2693 to C$1.2747. However, the number was higher than May's 0.3% contraction. Manufacturing output rose 0.2%.

Consumer prices in the U.S. came in unchanged in the month of June, according to a report released by the Labor Department on Friday.

US interest rates futures rose as traders pared their viewthe Fed would increase rates again in 2017.

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The Fed has frequently been overly optimistic about its predictions for rate hikes in the post-recession era.

The euro EUR= gained 0.64 percent to $1.468. Waiting too long to remove accommodation could eventually require the Fed to raise rates too rapidly and risk pushing the economy into recession.

The Dow Jones Industrial Average rose 19.57 points, or 0.09 per cent, to 21,572.66. The drop came after the US data raised doubts about USA economic growth and whether the Fed will hike rates again this year.

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

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 10-year German Bund ticked up nearly one basis point to yield 0.525 per cent. 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.

August Comex Gold settled at $1219.10, up $4.40 or +0.36%. The contract finished the week up 1.5 percent, its first gain in six weeks. Oil prices rose 1 percent.

Brent crude futures, the worldwide benchmark for oil, settled up 49 cents at US$48.91 per barrel.

Brent crude futures, the global benchmark for oil, were up 31 cents at $48.73 per barrel.

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