Published: Sat, July 15, 2017
Money | By Armando Alvarado

Treasury Yields Fall On Weak Inflation, Retail Sales

Treasury Yields Fall On Weak Inflation, Retail Sales

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.

U.S. consumer prices were unchanged in June compared with an expected gain of 0.1% for the month and the year-on-year rate declined to 1.6% from 1.9% and compared with an expected rate of 1.7%. On a month-on-month basis, the core CPI is expected to rise 0.2 percent after a 0.1 percent gain the previous month.

Slow inflation has baffled economists, given the very low unemployment rate, but the numbers come even as USA central bankers continue to say they expect inflation to rebound, allowing them to raise the benchmark interest rate gradually.

Up until this week, Fed officials had translated the recent moderation in prices as transitory but following Yellen's dovish tilt on Wednesday and today's weak numbers, policy makers will now have to reconsider whether additional rate hikes are warranted this year.

Moreover, retail sales growth for June was -0.2%, another disappointing economic data point that is driving market activity.

Additionally, the Commerce Department is scheduled to release its report on business inventories in the month of May. Food and beverage stores were down 0.4%, department stores were down 0.7% and restaurant sales were down 0.6%.

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TOKYO, July 14 (Reuters) - 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. "Future removals of accommodation should be done in a gradual and patient manner". The greenback is poised to find 110.00 as the next support level. Other data on Friday showed industrial production picked up in June, driven by a surge in oil and gas drilling.

Extending early slide, the greenback dropped to an 11-day low of 1.3012 against the pound.

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. The euro rose 0.2 percent to 129.400 yen, sterling also added 0.2 percent, to 146.90 yen and the Australian dollar climbed 0.3 percent to 87.89 yen, its highest since mid-February.

The greenback reached as low as 0.7366 against the kiwi, following a high of 0.7299 hit at 6:45 am ET.

However, manufacturing output was up just 0.2 per cent and is up 1.2 per cent year-over-year, with capacity well below its peak.

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