Treasury Yields Fall On Weak Inflation, Retail Sales

16 July, 2017, 01:15 | Author: Delbert Rhodes
  • Dollar Tumbles to Lowest Since September After Yellen's Comments

Market participants said the lack of spending from US shoppers made it hard to envision inflation approaching the Fed's 2% target.

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.

Political strategists say they expect a tax-reform bill to be presented in the fall and approved by next year, but the markets have doubted whether tax reform is still viable based on how long it has taken Congress to revise Obamacare. CPI is expected to rise by a slight 0.1 percent on headline inflation.

U.S. Treasuries yields stayed below their recent peaks, with the 10-year yield at 2.360 per cent, compared to 2.398 per cent marked on Friday, its loftiest level in nearly two months.

Traders will also be looking at the USA consumer price index (CPI) data as the next important inflection point with year-on-year inflation rate estimated to decline for a fourth consecutive month by 1.7 percent in June following a similar gain in May, it would also be the lowest since November 2016.

The euro was up 0.37 percent against the greenback to $1.1437 and sterling was 1.07 percent higher at $1.3073, after hitting $1.3082, its highest since September 23, 2016.

Weak auto sales, which have been down in the first half of 2017, were not to blame this time: excluding that volatile category, sales were still down 0.2 percent.

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That view was further reinforced by other US policymakers such as Dallas Federal Reserve Bank President Robert Kaplan on Thursday, though analysts were wary of kicking the dollar lower before USA inflation data.

US interest rates futures rose as traders pared their viewthe Fed would increase rates again in 2017. That has eased concerns the Fed was raising interest rates too quickly. The Dow rose 0.1 percent to 21,553.09.

US 10-year yield fell to 2.303 percent, from 2.348 percent late on Thursday. 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. While Ms. Yellen reiterated her expectation that inflation will rise over the coming years, she also said the central bank would be watching inflation data closely and could reassess its strategy if it continues to disappoint. It was poised for a weekly gain of 1.3 percent, the biggest since mid-May. Oil prices rose 1 per cent.

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.

OIL: Benchmark U.S. crude gained 7 cents to $46.15 per barrel in electronic trading on New York Mercantile Exchange.

Brent crude futures, the global benchmark for oil, settled up 49 cents, or 1.01 percent, at $48.91 per barrel.U.S.

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