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.
The so-called core CPI, which strips out food and energy costs, edged up 0.1 per cent in June, rising by the same margin for three straight months.
However, the core consumer price index (CPI) is forecast to have risen only 1.7 percent year-on-year in June after a similar gain in May.
Retail sales and CPI inflation are two of the most important pieces of USA data we get each month and both are due to be released shortly before the open on Wall Street. USA retail sales unexpectedly fell in June for a second straight month, which could temper expectations of strong acceleration in economic growth in the second quarter.
Data out today could, of course, surprise to the upside, but we don't think so - and it is more likely inflation will continue to show a retreat or at best no change - neither result is likely to be supportive of the Dollar.
As we discussed two weeks ago, USA data has disappointed for much of 2017, and that's created questions behind just how aggressively the Fed might be able to hike.
Their implied view fell to 47 percent shortly after the release of the latest CPI and retail sales data.
The Australian dollar rose 0.4 percent to $0.7758, well on track to post its best weekly performance in four months. The Russell 2000 index of smaller-company stocks inched up 0.1 percent to 1,425.66. "The bigger market-wide events are rate decisions out of Europe and Japan along with an updated inflation print out of the United Kingdom; and this will likely be where the bulk of market participants" attention remains. On Wednesday she said... If the Fed's assessment that the softness in CPI between February and May is transitory, the Fed will go ahead with its plan.
"It is broadly a US 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. The Standard & Poor's 500 index gained 0.2 percent to 2,447.83.
The gains, which ends a two-month stasis near the 21,500 level on the Dow Jones Industrial Average, came despite uneven big bank earnings, disappointing retail sales growth and a decline in the inflation rate to the weakest level since October.
U.S. Treasury yields dropped to multi-week lows on Friday as benign U.S. inflation data in June and an unexpected fall in retail sales fueled doubts about an interest rate increase later this year. The 10 yr yield is down by 5 bps and the 2s/10s spread is narrowing by 2 bps.
The most-active US gold futures for August delivery futures settled up $10.20, or 0.84 percent, at $1,227.50 per ounce. Oil prices rose 1 percent.
United States crude futures rose 1.8 per cent to $45.83 per barrel, extending their recovery from Monday's near two-week low of $43.65.