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Dollar, bond yields dip amid benign U.S. inflation data

16 July 2017

There is also consumer price index inflation data at 8:30 a.m., a much-anticipated report that could be market-moving if it is either weaker or stronger than expected. Inflation came-in flat versus an expected.2% gain, and retail sales fell by.2% against the expectation for a.1% gain.

Policymakers are confronted with benign inflation and a tight labour market as they weigh a third rate hike and announcing plans to start reducing the central bank's $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities.

This fell short of market expectations of a 0.1% increase.

It is now in a range of 1 percent to 1.25 percent.

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.

Indeed a cursory look at the EUR/USD chart, which has extended its uptrend into the 1.14s recently, supports a continuation higher, which would be commensurate with a weaker Dollar profile. The Commerce Department said on Friday retail sales fell 0.2 percent last month.

If low inflation persists, the Fed would have to stay its hand even longer, keeping interest rates near historic lows to encourage business and consumer spending and, in turn, price increases - a sign that economic activity is on a healthy growth cycle.

Centre briefs all-party MPs on standoff with China
While the meeting was largely around the Chinese issue, the opposition also had some questions relating to Jammu and Kashmir. China has repeatedly said India will have to withdraw its troops from the area for the month-long stand-off to end.

Asian shares steadied on Wednesday after Wall Street managed to weather a fresh twist in the political controversy surrounding U.S. President Donald Trump's administration, while investors looked ahead to Federal Reserve Chair Janet Yellen's comments later in the day. The Fed is now expected to raise interest rates once more this year, most likely in December, and announce plans to start reducing its roughly $4.5 trillion balance sheet following years of US Treasury and Mortgage Backed Securities purchases. That has eased concerns the Fed was raising interest rates too quickly.

The Dow Jones Industrial Average rose 19.57 points, or 0.09 per cent, to 21,572.66. While the 2-year note yield TMUBMUSD02Y, -2.05% slipped 3.2 basis points to 1.335%. The 10-year German Bund ticked up nearly one basis point to yield 0.525 per cent.

The CPI, in particular, will garner interest because "if you take Yellen at her word the Fed is starting to second guess itself as to whether recent weakness is transitory", said ANZ Bank New Zealand senior economist Phil Borkin.

The New Zealand dollar another high-earning currency that has gained from significant risk appetite this week, shed 0.02 percent to 0.7318 after reaching an eight-month peak of 0.7369 on Thursday.

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

Oil rose 1 percent on Friday, boosted by lower USA stockpiles, a slight slowdown in US crude production and signs of increased Chinese demand, but trading was volatile as global supply remained strong.

In oil markets, benchmark Brent and United States WTI futures contracts were on track for weekly gains.

Dollar, bond yields dip amid benign U.S. inflation data