Dollar falls after US CPI, retail data disappoint

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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.

Still, the economy likely gained speed in the second quarter after a sluggish performance at the start of the year.

The dollar also lost steam against the yen, which had been under renewed pressure following Friday's bond-buying by the Bank of Japan which highlighted divergent monetary polices between the two countries. The US CPI from the Bureau of Labor Statistics peaked in February at 2.7%, when Fed credibility and the need to tighten were riding high, but has since fallen to 1.6% or ~40%. The core CPI increased 1.7% year-on-year - still short of the Fed's 2% target.

"Most senior Fed officials had believed the slowdown in inflation was temporary, but now they have been forced to reassess their views", MarketWatch said.

Oil prices extended gains from the previous day as the USA government cut its crude production outlook for next year and as fuel inventories plunged.

The Treasury market saw a bit of renewed demand, as the 10-year T-note yield finally fell back below 2.30%. The Federal Reserve chair's second day of testimony to Congress generated little market-moving news.

Royal Mail RMG.L shares fell 2.4 percent after it replaced its pension plan, giving employees a choice between defined benefit or contribution pension scheme after opposition from trade unions.

The New Zealand dollar another high-earning currency that has gained from significant risk appetite this week, shed 0.02 percent to 0.7318 after reaching an eight-month peak of 0.7369 on Thursday.

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. The underlying gauge rose 0.2 per cent on Thursday.

US retail sales disappointed, falling 0.2% in June, marking the second straight decline. Ex-auto sales were expected to rise by 0.2%.

Other US data releases today pertained to June retail sales, a measure acting as a proxy for consumer spending.

Chinese steelmakers including Baotou Steel and Baoshan Iron & Steel Co. dropped more than 1 percent after U.S. President Donald Trump said he is considering quotas and tariffs to deal with steel dumping from China and others.

The greenback reversed from an early more than a 2-week high of 0.9701 against the Swiss franc, edging down to 0.9635.

It seems unlikely we will see a rebound in Retail Sales on a year-on-year basis due to the shape of the downward sloping curve on the historical data chart, which looks very much like it will continue lower rather than suddenly reverse, however, market analysts appear unusually confident of a positive print. In a third report on Friday, the Fed said industrial production increased 0.4 per cent in June after gaining 0.1 per cent in May.