Consumer Inflation, Retail Sales Soft In June, Industry Solid

16 July, 2017, 00:39 | Author: Celia Hoffman
  • Fed chairman's comments saw dollar crash. Tyrone Siu  Reuters

United States consumer prices were unchanged in June and retail sales fell for a second straight month, pointing to tame inflation and soft domestic demand that diminished prospects of a third interest rate increase from the Federal Reserve this year.

Excluding food and energy prices, core consumer prices crept up by 0.1% for the third consecutive month.

However, the core consumer price index (CPI) is forecast to have risen only 1.7 percent year-on-year in June after a similar gain in May.

Other US data releases today pertained to June retail sales, a measure acting as a proxy for consumer spending. Inflation came-in flat versus an expected.2% gain, and retail sales fell by.2% against the expectation for a.1% gain.

The dollar extended losses against a basket of currencies on the data while prices for U.S. government bonds rose.

The benchmark 10-year U.S. Treasury note US10YT=RR rose 6/32 in price to yield 2.3248 percent. Friday's CPI report is expected to show a 0.2% increase. Manufacturing output rose 0.2%.

The Federal Reserve is embarking on an annual summer ritual: Downgrading its overly optimistic forecasts for economic growth and, potentially, preparing for a pause in interest rate increases. It rose as high as $1.3088 after a closely watched survey of US consumer sentiment came in worse than forecast at 1400 GMT and was also half a percent higher at 87.63 pence per euro. Cor CPI inflation was 1.7%, same as in May.

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Yellen, as she has in other statements recently, told lawmakers that she expects low inflation to be transitory. The market is being primarily supported by Yellen's remark that the central bank would only gradually tighten monetary policy, curbing speculation that interest rates would rise a few times this year. The yen surged by 0.58%, with dollar/yen trading at 112.60. The Standard & Poor's 500 index gained 0.2 percent to 2,447.83.

European shares are expected to rise, with spread-betters looking to gains of 0.3 per cent in Germany's DAX and Britain's FTSE, and a 0.2 per cent rise in France's CAC at the opening. After initially falling below 2.3%, the 10-year yield climbed back above that level, reflecting strong forces that are still pushing up on yields, analysts said. The drop came after the USA data raised doubts about U.S. economic growth and whether the Fed will hike rates again this year.

Janet Yellen, chairwoman of the Fed, has said that the central bank is watching inflation closely. It earlier fell to 2.279 percent, its lowest since June 30.

The most-active USA gold futures for August delivery futures settled up $10.20, or 0.84 percent, at $1,227.50 per ounce.

Indeed a cursory look at the EUR/USD chart, which has extended its uptrend into the 1.14s recently, supports a continuation higher, which would be commensurate with a weaker Dollar profile.

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

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