Weak data pare traders' view on year-end United States rate hike

Andrew Cummings
July 15, 2017

Traders will also be looking at the U.S. consumer price index (CPI) data as the next important inflection point with year-on-year inflation rate estimated to decline for a fourth consecutive month by 1.7 percent in June following a similar gain in May, it would also be the lowest since November 2016.

Consumer Price Index (CPI), a main gauge of inflation, was unchanged on a seasonally adjusted basis in June, compared to 0.1 percent decrease in the previous month, said the Labor Department on Friday.

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

That caused a rally in the stock markets as investors celebrated the prospect of lower interest rates for longer.

"The CPI data begs the question, at what point does transitory becomes something that is more sustained, in terms of the softness", said Richard Franulovich, senior currency strategist at Westpac Banking Corp in NY. Further downtrend may take the greenback to support levels of around 1.25 against the loonie and 0.80 against the aussie.

The US dollar index against a basket of major currencies lost 0.08 percent to 95.69 and is set to end the week 0.25 percent lower.

Fed policymakers have lifted their benchmark short-term rate four times in the past 18 months.

The measure of wireless phone costs fell 0.8 percent in June and is down 13.2 percent in the past year. For the week, the Australian dollar and the Canadian dollar are among the top gainers after European shares were poised to post their best week since late April.

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.

Mr Clarke said he believes CPI will exceed consensus estimates, having reached 3% in June, forcing the Bank's governor, Mark Carney, to write an official letter to the Chancellor explaining why inflation has surpassed its target by 1%.

"Yellen has indicated after the June policy meeting, in the clearest way as possible by her standards, that she plans to start balance sheet reduction and there will be one more rate hike this year".

US Treasuries yields stayed below their recent peaks, with the 10-year yield at 2.352 per cent compared with 2.398 per cent marked on Friday, its loftiest level in nearly two months. It is poised for a 4 percent gain this week. The drop came after the US data raised doubts about USA economic growth and whether the Fed will hike rates again this year.

The euro gained 0.64 per cent to US$1.468 (RM6.28). The contract finished the week up 1.5 percent, its first gain in six weeks.

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

The loonie was about 0.1 percent weaker early on Friday at C$1.2729 to the dollar but is up nearly 1.1 percent this week. Silver was up almost 3 percent.

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

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