Published: Sat, July 15, 2017
Economy | By Annette Adams

US CPI Unchanged For June, Doubts Over Further Fed Tightening Will Persist

US CPI Unchanged For June, Doubts Over Further Fed Tightening Will Persist

The yield on the benchmark 10-year U.S. Treasury note fell Friday, capping its largest one-week decline in more than a month, as another soft inflation reading boosted expectations that the Federal Reserve will be cautious in raising interest rates.

The core CPI data came in below expectations of a 0.2% rise, which likely will further reduce odds of another Federal Reserve rate hike in coming months. Inflation has climbed just 1.6 percent from a year ago.

The U.S. dollar decline dafter data showed U.S. inflation in June was unchanged from the previous month and retail sales unexpectedly weakened, fueling doubts about an interest rate increase later this year.

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.

In early trading, US 10-year yield fell to 2.308 percent, from 2.331 percent before the data. Stocks in the US were mostly higher even as the data was reported, with the Nasdaq climbing 0.2%.

Meanwhile, Chicago Fed President Charles Evans, also a voting member of the rate-setting Federal Open Market Committee, will post his speech originally intended for Thursday at 1 p.m.

Amazon and other other nonstore retailer sales rose a so-so 0.4% on the month, with the annual gain slipping into single digits at 9.2%.

Looking ahead, investors are awaiting a host of US economic indicators, including core inflation, retail sales and industrial production for June later in the session for more insight into how the Fed might proceed.

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

The dollar index, which tracks the greenback against six major rivals, was down 0.5 to 95.248 after earlier falling to 95.186, its lowest since September 2016.

The euro vaulted to a 14-month high of $1.14895 in Asian trade.

The dollar pulled up 0.1 percent to 113.4 yen early on Friday, narrowing losses for the week to 0.4 percent. The gap between Canada's 2-year yield and its USA equivalent narrowed by 1.2 basis points to a spread of -14.4 basis points, its narrowest since August 18.The narrower spread comes after the Bank of Canada raised interest rates on Wednesday for the first time in seven years.

"If this continues the Fed won't be able to move much further on rates, but they can also take comfort that what may look like an asset bubble isn't fooling firms, banks, or consumers into spending with reckless abandon".

The unemployment rate is at 4.4 percent, near a 16-year low.

But, and this was enough for salivating bulls looking for hints that rate hikes could slow down or pause, "As we indicate in our statement, it's something we're watching very closely, considering risks around the inflation outlook".

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.

Other currencies including the Australian dollar gained 0.3 percent to 0.7759 extending weekly gain to 1.9 percent, its biggest since period ended March 17.

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.

Like this: