U.S. inflation flat in June while retail sales sink

  • U.S. inflation flat in June while retail sales sink

U.S. inflation flat in June while retail sales sink

U.S. Treasuries extended the fall that started on Thursday, hitting multi-week lows as benign U.S. inflation data in June and an unexpected fall in retail sales fuelled doubts about an interest rate increase later this year.

Consumer prices in the United States came in unchanged in the month of June, according to a report released by the Labor Department on Friday.

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 US dollar held steady on Friday as investors remained on guard ahead of the US annual inflation rate forecast which is expected to restrain the greenback from further gains.

Ahead of Fed Chair Yellen's testimony to Congress on the state of the U.S. economy from 1400 GMT, two of her colleagues cited low wage growth and muted inflation as reasons for caution on further interest rate increases. The Japanese yen strengthened 0.65 percent versus the greenback at 112.53 per dollar, while the Mexican peso gained 0.48 percent and the Canadian dollar rose 0.58 percent versus the greenback.

Core CPI y/y came out at 1.7% as expected but all the other data figures disappointed.

Alan Clarke, head of Scotiabank's European fixed income strategy, said food prices and air fares likely made the most notable gains last month, alongside smaller increases in alcohol costs, restaurant prices and package holidays. During her congressional testimony this week, Fed Chairwoman Janet Yellen repeated her belief that temporary factors were keeping a lid on consumer prices, but said she would watch them "very closely".

Market have struggled to get on board with one more rate hike though and Yellen's comments on Wednesday suggest Fed officials are not entirely convinced either.

The US dollar added 0.08 percent to 1.3746 against the Singapore dollar while the Malaysian ringgit was up 0.01 percent to 4.2908. In February, the year-on-year inflation rate hit the five-year high of 2.7% but has been softening ever since. It earlier fell to 2.279 percent, its lowest since June 30.

The yield on the 10-year note fell five basis points to 2.298% after earlier dropping as low as 2.75%. The 10-year German Bund ticked up nearly one basis point to yield 0.525 per cent.

Gold prices jumped 1.4 percent to the highest level in almost two weeks on Friday after data pointed to weak USA inflation, reaffirming doubts that the US central bank would again hike interest rates this year. The contract finished the week up 1.5 percent, its first gain in six weeks.

US West Texas Intermediate (WTI) crude futures rose 33 cents to $46.41 per barrel.