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Inflation and retail sales disappoints in the United States

BY JOEL HOLMES

Breaking through the 78 US Cents mark for the first time since May 2015, the Australian dollar benefitted in a big way late last week from a notably softer Greenback. Driven higher initially by comments made by US Fed Chair Janet Yellen who surprised investors by noting that monetary policy settings are sitting a lot closer to neutral than many had expected, a raft of disappointing economic releases from the world’s largest economy on Friday further increased the appeal of the AUD. Having touched an early session high of 0.7834 when valued against its US Counterpart, the AUD remains vulnerable to additional price-fluctuations today ahead of an all-important GDP and Industrial production print due out of China this morning. 

The Kiwi advanced further against the Greenback after weak US data reduced the prospects of a rate hike. With US inflation data surprising the market on the downside, coupled with soft retail sales and consumer sentiment numbers the USD fell dramatically across the board. With the NZD reflecting the smallest gain at 0.4% the Kiwi now trades around 0.735 this morning. Trading at a near five month high, the Kiwi now turns to second quarter inflation figures tomorrow for direction.

The Great British Pound has reached a fresh ten-month high when valued against its US counterpart and has managed to push through the psychological resistance level of 1.3000. With the domestic docket thin on Friday, the pair looked offshore at US inflation and Retail sales for June, both pieces of data showed a slowdown with Retail sales declining -0.2% compared with a 0.1% consensus gain. The Pound moved from a low of 1.2972 to high 1.3113 and currently changing hands at 1.3106 at the time of writing. Looking ahead the standout data release will be tomorrow’s CPI and then Thursday’s Retail sales. 

 

Price action was predominately moved by the eagerly awaited release of United States core CPI inflation for the month of June. Annualised CPI growth declined to 1.6% from 1.9% in May, disappointing market expectations and dampens the potential for a third interest rate hike by the Fed this year. Retail sales were also lower as the US Dollar was sold off in droves against the majority of major currencies. Euro continued its run, seeing a 14-month high last week of 1.1480 after a greenback sell off ahead of their own set of core inflation figures this evening. USD/JPY slumped from 114.30 highs to the mid 112’s on Friday evening, with a bank holiday in Japan expected to slow volatility. Data set from China today will be the main focus on investors’ minds.