14/08/2017 - US Figures Point To Benign Inflation

USD

The U.S. dollar weakened against a basket of currencies on Friday, after data showed U.S. consumer prices rose less than expected in July, pointing to benign inflation that could make the Federal Reserve cautious about raising interest rates again this year.

The U.S. consumer price index edged up 0.1 percent last month after being unchanged in June. Economists polled by Reuters had expected the CPI to rise 0.2 percent in July. Federal funds futures suggested traders saw a 40 percent chance that the Fed would increase short-term rates at its Dec. 12-13 policy meeting, compared with 42 percent shortly before the release.

The Dollar fell to a sixteen-week low against the Japanese yen, but pared losses after Russian Foreign Minster Sergei Lavrov said there was a Russian-Chinese plan to defuse tensions between the United States and North Korea.

GBP

Sterling held near a three-week low against the dollar on Friday as investors grew wary about the outlook of the British economy after a mixed bag of data this week. The pound has lost more than 13 percent in trade-weighted terms since last year's decision to leave the European Union, but Britain's trade deficit with the rest of the world remains huge.

As the economic picture has become cloudier, money market pricing for a rise in UK interest rates this year has collapsed and is the main driver of sterling selling since the start of August, analysts say. Data this week showed falling car production and a slide in construction, which bode poorly for future months after a more general slowdown in the first half of 2017.Inflation data next week will be the big driver for sterling. Data last month showed an unexpected slowdown in price pressures for the first time since October.

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