Dollar Looks Worse For Wear, Breakout Fails After Yellen Comments, Weak Inflation

Dollar Looks Worse For Wear, Breakout Fails After Yellen Comments, Weak Inflation

In a report, the U.S. Commerce Department said that consumer prices was unchanged in June from a month earlier, compared to forecasts for 0.1% increase and a 0.1% drop in the prior month.

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. Over the last 12 months, "headline" inflation rose 1.6 percent.

That caused a rally in the stock markets as investors celebrated the prospect of lower interest rates for longer.

"We need inflation more than anything else".

Global benchmark Brent inched down 0.1 percent to $48.36 following Thursday's 1.4 percent jump, and is headed for a 3.6 percent gain this week.

Regarding the reaction in the forex markets, the dollar index, which gauges the dollar's strength against major rival currencies, fell sharply by 0.50%, reaching a new nine-month low of 95.30. Investors saw the remarks as a signal that the Fed, which has raised interest rates three times since December, might slow the pace of future interest rate increases.

UK's benchmark FTSE 100 closed down by 0.7 percent, the pan-European FTSEurofirst 300 ended the day down by 0.01 percent, Germany's Dax ended down by 0.2 percent, France's CAC finished the day down by 0.1 percent. The S&P 500 gained 11.44 points, or 0.47 per cent, to 2,459.27 and the Nasdaq Composite added 38.03 points, or 0.61 per cent, to 6,312.47.

The yield on the 10-year note fell five basis points to 2.298% after earlier dropping as low as 2.75%.

Dollar Looks Worse For Wear, Breakout Fails After Yellen Comments, Weak Inflation
Dollar Looks Worse For Wear, Breakout Fails After Yellen Comments, Weak Inflation

Money markets pricing suggests less than a 50 percent chance of a hike over the next year, according to CME's FedWatch tool. EUR/USD was trading at 1.1434 from around 1.1418 ahead of the release of the data, GBP/USD was at 1.2992, compared to 1.2974 previously, while USD/JPY was at 112.50 from 113.05 earlier.

Even before today's report, real yields were declining, with the yield on a 10-year TIPS dropping from 0.66% to 0.58% in less than a week.

The latest data is likely to trigger fresh doubts surrounding the inflation outlook and create renewed uncertainty surrounding potential further rate increases, although the Fed will see the steady rate of services-sector inflation as justifying their policy.

Spot gold gained 0.96 pct at $1,228.61 per ounce by 3:01 p.m. EDT (1901 GMT) after hitting $1,232.76.

The most-active US gold futures for August delivery futures settled up $10.20, or 0.84 percent, at $1,227.50 per ounce. It was poised for a weekly gain of 1.3 percent, the biggest since mid-May. The contract finished the week up 1.5 percent, its first gain in six weeks.

Drugmaker AstraZeneca AZN.L continued Thursday's slide, down 1.6 percent due to uncertainty around reports that CEO Pascal Soriot was preparing to leave the company.

Brent crude futures LCOc1 , the worldwide benchmark for oil, settled up 49 cents at $48.91 per barrel.

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

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