USA annualized inflation eases in June, core CPI in line

Daily August Comex Gold

Daily August Comex Gold

The US dollar held steady on Friday as investors remained on guard ahead of the US annual inflation rate forecast which is expected to restrain the greenback from further gains.

In a separate report, the Commerce Department said retail sales fell 0.2 per cent last month, weighed down by declines in receipts at service stations, clothing stores and supermarkets. The central bank usually tries to aim for 2% core inflation or less.

Financial markets were pricing in a 47 percent chance of a 25 basis point rate hike in December, down from 55 per cent before the data, according to CME Group's FedWatch program. The yellow metal was last seen trading at $1,221.70 a troy ounce, where it was up $4.70, or 0.4%, from the previous close.

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.

Looking ahead, investors are awaiting a host of USA economic indicators, including core inflation, retail sales and industrial production for June later in the session for more insight into how the Fed might proceed. 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". Even excluding for auto sales, which have declined recently, retail sales figures still posted a 0.2% drop.

Ahead of Fed Chair Yellen's testimony to Congress on the state of the USA economy from 1400 GMT, two of her colleagues cited low wage growth and muted inflation as reasons for caution on further interest rate increases.

United Overseas Bank economists said on Thursday that Dr Yellen made an important point when addressing the uncertain USA inflation outlook. Meanwhile, growth and inflation has started to show with more consistency in Europe and the United Kingdom, and this has led to even more deductive weakness in the Greenback as traders shift rate hike bets in the Euro and British Pound. That has eased concerns the Fed was raising interest rates too quickly. It earlier fell to 2.279 percent, its lowest since June 30. The 10-year German Bund ticked up nearly one basis point to yield 0.525 per cent. Amazon is now back above its 50-day moving average and regained the 1000 mark on Wednesday as Fed chief Janet Yellen signaled that rate hikes could pause if inflation readings continue to come in on the soft side. The 2 yr yield was at 1.35% before the data and is down 2 bps since.

Oil prices held firm after strong gains on Tuesday on reports showing cuts in USA oil production and declines in US crude and European product stockpiles.

U.S. West Texas Intermediate (WTI) crude futures CLc1 rose 46 cents to settle at $46.54 per barrel.

Brent crude futures, the global benchmark for oil, settled up 49 cents, or 1.01 percent, at $48.91 per barrel.U.S. Electricity costs slid 0.6 percent.

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