NZ dollar heading to a weekly 0.8% decline, eyes on US

15 July, 2017, 17:48 | Author: Leticia Walters
  • U.S. Dollar Index

The US dollar declined against its major counterparts in the European session on Friday, as US inflation turned flat in June and retail sales unexpectedly decreased for the second consecutive month, dampening expectations for faster rate hike by the Federal Reserve.

The U.S. consumer price index increased 1.6 percent, the smallest gain since October 2016, after rising 1.9 percent in May, the Labor Department said. Core CPI, the measure that excludes volatile energy and food products, remained steady at 0.1% on a monthly basis, falling short of the forecasted 0.2%.

Core CPI increased at an annualized rate of 1.7% in June, in line with consensus and the previous month's increase.

US retail sales unexpectedly decreased for the second consecutive month in June.

US 10-year yield fell to 2.303 percent, from 2.348 percent late on Thursday.

US crude slipped 0.15 percent to $46.02 a barrel, after rising 1.3 percent on Thursday. Economists are expecting a quarterly rise of 0.2 percent for annual inflation to be running at 1.9 percent.

Food prices were unchanged on the month while energy prices fell 1.6% with a fifth successive decline in fuel oil prices. Market participants said the lack of spending from US shoppers made it hard to envision inflation approaching the Fed's 2% target.

The dollar index, was down 0.62% to 95.14 after earlier falling to 95.132, its lowest since September 2016.

Final data from the Ministry of Economy, Trade and Industry showed that Japan's industrial production declined more than estimated in May.

Before this week, investors had been selling bonds, driven largely by anxiety that an improving global economy may allow major central banks outside of the U.S.to scale back on stimulus efforts that have helped lift asset prices since the financial crisis.

At 10:12 a.m. EDT (1412 GMT), federal funds futures implied that traders saw a 53-percent chance the Federal Reserve would raise key overnight borrowing costs by at least a quarter point at its December 12-13 meeting, down from about 55 percent at Thursday's close, according to CME Group's FedWatch program.

Meanwhile, U.S. stock futures pointed to a mixed open.

The kiwi was battered early in the week by disappointing domestic data but gained sharply toward the end of the week amid speculation the Reserve Bank may be more inclined to hike interest rates in the face of increases and bullish talk from other central banks including the Bank of Canada. 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. It is poised for a 4 percent gain this week.

The latest data is likely to trigger fresh doubts surrounding the inflation outlook and create renewed uncertainty surrounding potential further rate increases, although the Fed will see the steady rate of services-sector inflation as justifying their policy. It lost a half percent against the euro.

Even before today's report, real yields were declining, with the yield on a 10-year TIPS dropping from 0.66% to 0.58% in less than a week.

Oil rose 1 percent on Friday, boosted by lower US stockpiles, a slight slowdown in USA crude production and signs of increased Chinese demand, but trading was volatile as global supply remained strong.

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