Dollar falls after US CPI, retail data disappoint

Dollar falls after US CPI, retail data disappoint

Euro strengthened against the dollar on Friday as the greenback weakened after a benign reading of USA inflation in June and soft retail demand raised doubts the Federal Reserve would increase interest rates later this year.

Inflation in June came in flat, a sign that consumer prices had trouble sustaining its upward momentum.

Core inflation - which strips out food and energy - rose 0.1% in June and is up only 1.7% over the last 12 months, continuing a break-out below the 2.0% level, where it remained for more than a year. Year-on-year CPI has been softening steadily since February, when it hit 2.7 percent.

Weak vehicle sales, which have been down in the first half of the year, were not to blame this time: excluding that volatile category, sales were still down 0.2 per cent. Petrol stations, however, saw a 1.3 per cent drop in sales last month, a time when Americans traditionally hit the road for summer holidays, pushing petrol prices higher.

US Treasuries yields stayed below their recent peaks, with the 10-year yield at 2.352 per cent compared with 2.398 per cent marked on Friday, its loftiest level in nearly two months.

The University of MI released a report on Friday showing a notable deterioration in US consumer sentiment in the month of July.

Stock markets, meanwhile, marched higher.

The measure of wireless phone costs fell 0.8 percent in June and is down 13.2 percent in the past year.

The annualised rate of inflation in several CPI components over the past three months showed declines of 4.9 percent in apparel, 5.5 percent in used cars and trucks and 4.1 percent in professional services, said Heidi Learner, chief economist in NY for brokerage Savills Studley, a unit of Savills Plc SVS.L .

Minneapolis Federal Reserve Bank President Neel Kashkari said he finds it hard to believe that the USA economy is in danger of overheating when wage growth is so low.

After surprisingly weak CPI inflation data, the dollar index sank to a new low of 95.186 Friday, the lowest since September of past year.

Data out today could, of course, surprise to the upside, but we don't think so - and it is more likely inflation will continue to show a retreat or at best no change - neither result is likely to be supportive of the Dollar.

U.S. West Texas Intermediate (WTI) crude futures CLc1 rose 46 cents to settle at $46.54 per barrel.

The U.S. dollar remained broadly on the back foot against major currencies. Gov. Lael Brainard said the deterioration in consumer prices could give them pause on a rate hike this year. 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.

Global benchmark Brent inched down 0.1 percent to $48.36 following Thursday's 1.4 percent jump, and is headed for a 3.6 percent gain this week. It earlier fell to 2.279 percent, its lowest since June 30. "After their June rate hike, the Fed is seen watching inflation trends carefully before tightening policy again".

The loonie was about 0.1 percent weaker early on Friday at C$1.2729 to the dollar but is up nearly 1.1 percent this week.

August gold gained $10.20, or 0.8%, to settle at $1,227.50/oz.

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