Inflation weighs on yields, dollar; stocks lackluster (T, JPM, C)

Andrew Cummings
October 14, 2017

Treasury yields slipped on Friday after muted underlying US inflation data offset higher gasoline prices and strong retail sales while the USA dollar regained ground lost earlier in the day but was still set for its worst week in five.

The inflation rate since the beginning of the year (September 2017 compared to December 2016) has been 0.7% and the annual inflation in September 2017 compared to September 2016 was 1.3%.

Data showed this morning that United States consumer price index rose only 0.5% last month, due mostly to a temporary spike in gas prices after Hurricane Harvey.

With the unexpected increase, the consumer sentiment index surged up to its highest level reaching 103.8 in January of 2004.

"PPI was a little bit better, but that doesn't really translate well to CPI", said Gennadiy Goldberg, an interest rate strategist at TD Securities in NY.


U.S. Treasury yields dipped and the dollar rose slightly on Thursday as investors awaited U.S. inflation data while Wall Street stock indexes fell as earnings season kicked off with a whimper. Sterling was last trading at $1.3261, up 0.30 percent on the day.

The Dow Jones Industrial Average fell 17.09 points, or 0.07 percent, to 22,855.8, the S&P 500 lost 2.1 points, or 0.08 percent, to 2,553.14 and the Nasdaq Composite dropped 2.41 points, or 0.04 percent, to 6,601.14.

September's rise was the biggest since January and pushed up the year-on-year CPI gain to 2.2 per cent from 1.9 per cent in August.

"While a December rate hike had seemed a strong probability after last Friday's solid wage growth data, the picture now looks much more finely balanced", said John Dolan, senior dealer at FEXCO Corporate Payments.

Also in currencies, the euro was down 0.15 percent to $1.1839 snapping four straight days of gains after rising to its highest since September 25 earlier in the session.


Bitcoin smashed through the $5,000 barrier for the first time and was last up 10 percent on the day.

US crude rose 1.52 percent to $51.37 per barrel and Brent was last at $57.16, up 1.62 percent.

Against the euro, the dollar fell 0.3% to $1.1864 and was 0.4% lower versus the pound at $1.3315.

"On the opposite case though, a miss on one or both reports will disappoint the dollar bulls. and further dumping of the US currency should be expected", he said, also referring to Friday's consumer sentiment report due at 10 a.m.

Spot gold added 0.1 percent to $1,293.37 an ounce.


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