Yields fall after soft USA inflation, retail sales data

Dollar Drops and Stocks Surge as Yellen Echoes the'Fed Put

Dollar Drops and Stocks Surge as Yellen Echoes the'Fed Put

The increase in core prices reflected 0.2% growth in shelter prices as well as higher prices for medical care, motor vehicle insurance, education, and personal care.

This view is backed up by Hermes Investment Management group chief economist Neil Williams, who believes the Fed remains the test case for whether central banks can ever "normalise" rates.

Excluding food and energy prices, core consumer prices crept up by 0.1% for the third consecutive month. The Commerce Department said on Friday retail sales fell 0.2 percent last month. The dollar index .DXY , which tracks the greenback against six major rivals, slid 0.64 percent to 95.113 after earlier falling to 95.100, its lowest since September 2016.

As a result, the odds of another rate hike in December as judged by the futures market fell to 43.1 percent, from 47.3 percent a week ago.

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.

The New Zealand dollar was trading at 73.16 USA cents as at 5 pm from 72.84 cents late yesterday but was weaker versus last Friday in NY when it traded at 73.80.

The New Zealand dollar held onto its overnight gains but was headed for a 0.8 percent weekly decline as investors await several USA economic indicators, including inflation numbers. Other data on Friday showed industrial production picked up in June amid a rise in output at mines and factories. The greenback is seen challenging support around the 0.75 area. It hit session high at 0.7828 and made session lows at 0.7711 levels.

USA retail sales also underperformed, falling for a second straight month in June.

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 Dow rose 0.1 percent to 21,553.09.

Outside of the U.S, there are no material stats scheduled for release out of the United Kingdom, with data out of the Eurozone limited to June's finalized inflation figures for Italy and Eurozone trade figures for May. It was the yield's largest weekly decline since the week ended June 2.

FED WATCH: Yellen rehashed her key message in her comments to Congress on Thursday, speaking of challenge posed by the dual risks of inflation: prices rising too slowly and prices accelerating too quickly.

In June, gasoline prices fell 2.8 per cent, decreasing for a second straight month.

From what we've seen of recent - both the European Central Bank and the BoJ have made efforts to talk-down their currencies and, if they're effective next week, this could bring a modicum of strength to the U.S. Dollar that would essentially amount to a retracement of the "bigger picture' bearish trend".

The greenback reversed from an early more than a 2-week high of 0.9701 against the Swiss franc, edging down to 0.9635.

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