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Published: Mon, July 17, 2017
Economy | By Melissa Porter

US Consumer Prices Unchanged In June

US Consumer Prices Unchanged In June

LONDON, July 14 (Reuters) - The Australian dollar hit a fresh eight-month high on Friday as risk appetite was robust with global stock markets hitting record highs and after dovish comments from global policymakers. In February, the year-on-year inflation rate hit the five-year high of 2.7% but has been softening ever since.

The Consumer Price Index (CPI) measure of inflation is forecast to come in at 2.9% in June, according to consensus estimates, in line with May's figure but above April's reading of 2.7%. However, manufacturing output was up just 0.2 percent and is up 1.2 percent year-over-year, with capacity well below its peak.

CPI is expected to rise 0.2 percent on a month-to-month basis after a 0.1 percent increase earlier month, a soft result may wane Fed rate hike speculation even more therefore burdening the USA dollar.

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 benign inflation rate "could cast doubts on the Federal Reserve's ability to increase interest rates for a third time this year", CNBC said.

The dollar index is breaking to the lowest level since September 2016 and gold is up 1%.

Cheap energy prices kept US inflation flat in June in another sign price pressures remain weak in the world's largest economy, Labor Department figures showed on July 14.

"It is broadly a USA dollar-negative market as latest comments from Yellen and others suggest that interest rates will rise very gently and that is supportive for high-yielding currencies for now", said Viraj Patel, an FX strategist at ING Bank in London.

USA two-year yields slid as well, down at 1.343 percent, from 1.355 percent before the data's release. The German 10-year yield fell as much as 4 basis points to 0.49 percent, before paring declines to about 0.53 percent at the end of day.

MSCI's broadest index of Asia-Pacific shares outside Japan ticked up 0.3 per cent. Japan's yen-sensitive Nikkei slid 0.4 per cent on the yen's gains but MSCI's dollar-denominated Japan index gained 0.5 per cent.

Upon release of the retail sales and inflation data, futures were little changed on the stock market today, though Nasdaq futures moved higher. Manufacturing output rose 0.2%. Yields fall when bond prices rise. The S&P 500 gained 11.44 points, or 0.47 percent, to 2,459.27 and the Nasdaq Composite added 38.03 points, or 0.61 percent, to 6,312.47.

Gold XAU= was steady at $1,216.58 an ounce, heading for a 0.3 percent gain for the week.

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