Published: Sat, July 15, 2017
Business | By Max Garcia

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

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

The Labor Department reported Friday that the consumer-price index, or cost of living, was unchanged last month, while the rate of inflation over the past 12 months slowed to 1.6% from 1.9% in the prior month.

Economists had forecast the CPI edging up 0.1 percent last month and its drop of 0.1 percent in May and the lack of a rebound in June could trouble Fed officials who have largely viewed the recent moderation in price pressures as transitory.

Gas stations, however, saw a 1.3 per cent drop in sales last month, a time when Americans traditionally hit the road for summer holidays pushing gasoline prices higher.

Data out today could, of course, surprise to the upside, but we don't think so - and it is more likely inflation will continue to show a retreat or at best no change - neither result is likely to be supportive of the Dollar.

The US dollar index, which tracks the greenback against a basket of six major rivals, was at 95.18, compared to 95.41 ahead of the report. "The prospects for a third hike in short-term interest rates this year continue to dim".

The Canadian dollar remained near its strongest in over a year after the Bank of Canada this week raised interest rates for the first time since 2010, with further tightening expected this year.

The dollar pulled up 0.1 percent to 113.4 yen early on Friday, narrowing losses for the week to 0.4 percent. The S&P 500 .SPX gained 11.44 points, or 0.47 percent, to 2,459.27 and the Nasdaq Composite .IXIC added 38.03 points, or 0.61 percent, to 6,312.47. The consumer sentiment index is expected to edge down to 95.0 in July falling to 95.1 in June.

USA two- and 30-year yields slid as well.

The dollar was little changed against a group of peers early on Friday, as currency investors remained cautious ahead of US inflation data due later in the session, which is expected to set the greenback´s near-term direction.

After keeping its key policy rate at a record low near zero for seven years, the central bank began raising rates gradually with one quarter-point hike in December 2015, another one last December and two more in March and June of this year.

The unemployment rate is at 4.4 percent, near a 16-year low. The yield on the 30-year bond, or the long bond, TMUBMUSD30Y, -0.85% fell 3.1 basis points to 2.888%. It's set for a 3.2 percent gain for the week.

The euro was up 0.37 percent against the greenback to $1.1437 and sterling was 1.07 percent higher at $1.3073, after hitting $1.3082, its highest since September 23, 2016.

The FTSE 100 .FTSE fell 0.5 percent, underperforming mid-caps .FTMC and taking weekly gains to a narrow 0.2 percent.

Drugmaker AstraZeneca AZN.L continued Thursday's slide, down 1.6 percent due to uncertainty around reports that CEO Pascal Soriot was preparing to leave the company.

US West Texas Intermediate (WTI) crude futures rose 46 cents to settle at US$46.54 per barrel. Brent futures gained 1.5 per cent to $48.25 per barrel.

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