Published: Fri, August 11, 2017
Economy | By Annette Adams

USD: US July CPI Missed A Bit; Overall USD Negative - CIBC

USD: US July CPI Missed A Bit; Overall USD Negative - CIBC

The Producer Price Index for final demand fell 0.1% in July after rising to a seasonally adjusted 0.1 in June. That lifted the year-on-year increase in the CPI to 1.7 per cent from 1.6 per cent in June.

The dollar struggled for direction in Friday's trade, with traders erring on the side of cautious ahead of the closely watched USA inflation report that could weaken or strengthen the case for another Federal Reserve rate hike this year.

Excluding food and energy prices, core consumer prices still crept up by 0.1% in July, matching the increases seen in the three previous months.

The U.S. central bank has a 2 per cent inflation target and tracks a measure that has been stuck at 1.5 per cent since May.

The Fed has raised rates twice this year and expects to hike again, likely in December. Stripping out the volatile food and energy components, consumer prices gained 0.1 percent for a fourth straight month.

While the dollar was struggling to recover as geopolitical risks between the United States and the North- Korea heightened after the two presidents exchanged war of words, data on producer prices and initial jobless claims came in lower than expected, pushing the currency further down.

Owners' equivalent rent of primary residence rose 0.3 per cent after advancing by the same margin in June. This downfall, which was the biggest one in 11 months, surprised analysts who expected producer prices to climb by 0.1% instead as with a month ago.

Almost 80% of the decline this month was fueled by a 0.2% decrease in the cost of services.

"That took the 12 month headline rate up a tick to 1.7%, but left core inflation unchanged (matching consensus) at 1.7%". The cost of new motor vehicles fell 0.5 per cent, marking the sixth consecutive monthly decline.

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