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 US consumer price index increased 1.6 per cent, the smallest gain since October 2016, after rising 1.9 per cent in May, the Labour Department said. That's down sharply from February, when prices rose 2.7 percent from a year earlier. The CPI dropped 0.1 per cent in May and the lack of a rebound in June could trouble Fed officials who have largely viewed the recent moderation in price pressures as transitory. Even excluding for auto sales, which have declined recently, retail sales figures still posted a 0.2% drop. Retail sales were weak, falling in six of the 13 major spending categories with department store sales down 0.7 percent.
GBP/USD is supported in the range of 1.2952 levels and now trading at 1.3101 levels. The British pound rose sharply against the greenback on Friday, climbing more than 1 percent after data further undermined expectations for more hikes in US interest rates.
The US dollar added 0.08 percent to 1.3746 against the Singapore dollar while the Malaysian ringgit was up 0.01 percent to 4.2908.
The trade-weighted index rose to 78.18 from 77.91 late yesterday. It's not usually a market mover but with so much attention on inflation at the moment, this report could be an exception.
"This cements the weaker trend in the dollar and lower U.S. yields and I think this story has got legs", Franulovich said.
However, "The current data provide few reassurances for the Federal Reserve" about the growth outlook, economist Diane Swonk said. The Japanese yen strengthened 0.65 per cent versus the greenback at 112.53 per dollar, while the Mexican peso gained 0.48 per cent and the Canadian dollar rose 0.58 per cent versus the greenback.
WALL STREET: U.S. stocks finished with modest gains on Thursday. It touched on Wednesday its strongest in almost 13 months at C$1.2681.
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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.
Lower costs for gas, airline tickets, new and used cars and wireless mobile phone plans kept USA consumer prices flat in June, evidence that inflation remains muted.
Recent comments from MPC members including Mr Carney suggest there is growing support for a rate hike.
Gas prices fell 2.8 percent in June, after a 6.4 percent fall in May.
Dow Jones closed up by 0.41 percent, S&P 500 ended up 0.47 percent, Nasdaq finished the day up by 0.59 percent.
After keeping its key policy rate at a record low near zero for seven years, the central bank began raising rates gradually with one quarter-point hike in December 2015, another one last December and two more in March and June of this year. While the 2-year note yield TMUBMUSD02Y, -2.05% slipped 3.2 basis points to 1.335%. It was the yield's largest weekly decline since the week ended June 2.
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 2 yr yield was at 1.35% before the data and is down 2 bps since. Electricity costs slid 0.6 percent.