Dollar Drives to Ten-Month Lows as US Data Continues to Disappoint

Cautious Fed Lifts Global Stocks to Record High, Investors Eye Earnings Lift

The US dollar declined against its major counterparts in the European session on Friday, as US inflation turned flat in June and retail sales unexpectedly decreased for the second consecutive month, dampening expectations for faster rate hike by the Federal Reserve.

Industrial production rose for the fifth straight month in June, increasing 0.4 percent on a continued rise in oil and gas drilling and coal mining. The U.S. consumer price index increased 1.6 percent, the smallest gain since October 2016, after rising 1.9 percent in May, the Labor Department said.

The falling price of gasoline also helped hold down United States retail sales, which contracted for the second straight month in June, while manufacturing output rose slightly but slowed in the second quarter, according to two separate reports Friday. Market participants said the lack of spending from USA shoppers made it hard to envision inflation approaching the Fed's 2% target.

The benchmark 10-year US Treasury note rose 6/32 in price to yield 2.3248 per cent.

The Philippine peso somewhat recovered 0.1 percent to 50.610 after earlier fall of 0.3 percent while Indian rupee was steady at 64.4580.

The measure of wireless phone costs fell 0.8 percent in June and is down 13.2 percent in the past year.

The U.S. data bolstered expectations that the U.S. Federal Reserve would likely to move slowly to continue raising interest rates in the absence of inflation signs.

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

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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. On Wednesday she said...

In her House comments, Yellen discussed the possibility that a recent slowdown in inflation could persist longer than the Fed expects.

Yellen said in her testimony that the Fed is keeping a close eye on the inflation and it is still early to assume the underlying trend of prices is falling short of the central bank's target of 2 percent.

European shares are expected to rise, with spread-betters looking to gains of 0.3 per cent in Germany's DAX and Britain's FTSE, and a 0.2 per cent rise in France's CAC at the opening. "We're watching this very closely and stand ready to adjust our policy if it appears the inflation undershoot appears consistent". Retail sales rose 2.8 per cent year-on-year in June.

USA 10-year yield fell to 2.303 percent, from 2.348 percent late on Thursday.

The greenback edged down 0.2 percent to 1134.30 against Korean won.

Elsewhere, in the commodities market, gold futures traded at $1,228.05 a troy ounce, compared to $1,221.71 ahead of the data, while crude oil traded at $46.58, compared to $46.62 prior to the release.

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

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