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US Dollar Looking Vulnerable Ahead of US Inflation and Retail Sales Data

US Dollar Looking Vulnerable Ahead of US Inflation and Retail Sales Data

Yellen said in her testimony that the Fed is keeping a close eye on the inflation and it is still early to assume the underlying trend of prices is falling short of the central bank's target of 2 percent.

The Labor Department said its consumer price index was flat in June after edging down by 0.1% in May.

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.

Their implied view fell to 47 percent shortly after the release of the latest CPI and retail sales data.

At the time of the report, the Euro was up 0.13% at $1.14125 ahead of today's stats, with monetary policy divergence remaining in favour of the Euro ahead of next week's European Central Bank interest rate decision and press conference, when the markets will certainly be demanding timelines on when a tapering to the asset purchasing program will begin.

Against the Japanese yen, the greenback was down 0.62 percent to 112.57 yen, after hitting a near two-week low of 112.28 yen. The dollar index is breaking to the lowest level since September 2016 and gold is up 1%.

US equities notched new record highs on Friday - but perhaps not for the reasons many investors think.

US Dollar Looking Vulnerable Ahead of US Inflation and Retail Sales Data

The FTSE 100 .FTSE fell 0.5 percent, underperforming mid-caps .FTMC and taking weekly gains to a narrow 0.2 percent. Matters appeared to kick-off even before Chair Yellen's opening statement was read at 10:00 AM on Wednesday, as the Monetary Policy Report to Congress that was released at 8:30 AM seemed to catch trader's attention as the final paragraph of the report reiterated the "Fed Put" that has helped to keep equity prices elevated.

The Fed is projecting one more interest rate hike for this year, which economists expecting it to come in December.

The falling price of gasoline also helped hold down United States retail sales, which contracted for the second straight month in June, while manufacturing output rose slightly but slowed in the second quarter, according to two separate reports Friday.

In other words, the stock market is moving more in line with the much more gradual pace of tightening priced in by the futures market.

Industrial production rose for the fifth straight month in June, increasing 0.4 percent on a continued rise in oil and gas drilling and coal mining. It was poised for a weekly gain of 1.3 percent, the biggest since mid-May.

Other than the yen, the dollar was on the gaining side with the rest of the major currencies including a 0.2 boost to 0.9695 against the Swiss franc.

US West Texas Intermediate (WTI) crude futures rose 46 cents to settle at US$46.54 per barrel. Brent crude, used to price global oils, was flat at $48.42 per barrel in London. Exports grew 2.1% from April and imports by 1.6%. It reached session high at 1.3117 and dropped to session low at 1.2988 levels. "I doubt this alone would lead to a risk-off market", said Hiroko Iwaki, senior fixed income strategist at Mizuho Securities.


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