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

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

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

"Coupled with ongoing soft inflation data, continued weakness on the consumer side suggests the Fed's conviction for a second-quarter rebound was but a figment of monetary policy imagination", said Lindsey Piegza, chief economist at Stifel Nicolaus.

Overall retail sales fell 0.2 percent for the month to $473.5 billion, a surprise to analysts who had forecast an increase of 0.1 percent. It's not usually a market mover but with so much attention on inflation at the moment, this report could be an exception. The Russell 2000 index of smaller-company stocks inched up 0.1 percent to 1,425.66.

New Zealand's two-year swap rate rose 1 basis point to 2.26 while the 10-year swaps rose 3 basis points to 3.35 percent.

U.S. consumer prices were unchanged in June and retail sales fell for a second straight month, pointing to tame inflation.

The dollar index fell 0.4 per cent against a basket of currencies, while the euro gained 0.39 per cent to $1.144. The Commerce Department said on Friday retail sales fell 0.2 percent last month. It is also benefiting from U.S. dollar weakness as signs the Federal Reserve will pursue only a gradual rate tightening path weigh on the greenback after Senate testimony from Federal Reserve chair Janet Yellen.

USA interest rates futures rose as traders pared their view the Federal Reserve would increase rates again in 2017.

European shares had their strongest week in more than two months as investors piled back into equities on signs that the world's major central banks would likely not tighten monetary policy as quickly as some had feared.

As a result, traders trimmed expectations of a rate hike by the end of the year, with dollar interest rate futures pricing in about a 55 per cent chance compared to about 60 per cent earlier.

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The Dow Jones Industrial Average rose 84.65 points, or 0.39 per cent, to 21,637.74.

US 10-year yield fell to 2.303 percent, from 2.348 percent late on Thursday. Meanwhile, growth and inflation has started to show with more consistency in Europe and the United Kingdom, and this has led to even more deductive weakness in the Greenback as traders shift rate hike bets in the Euro and British Pound. Retail sales rose 2.8 per cent year-on-year in June. The 10-year German Bund ticked up nearly one basis point to yield 0.525 per cent.

In her second day of Congressional testimony, Yellen backed support for "gradual" increase in interest rates, depending upon the path of inflation.

Spot gold gained 0.96 pct at $1,228.61 per ounce by 3:01 p.m. EDT (1901 GMT) after hitting $1,232.76. Electricity costs slid 0.6 percent. The contract finished the week up 1.5 percent, its first gain in six weeks.

Oil prices held firm after strong gains on Tuesday on reports showing cuts in USA oil production and declines in US crude and European product stockpiles.

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

Brent crude futures LCOc1 , the global benchmark for oil, settled up 49 cents at $48.91 per barrel.

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