Pound rides high as data hits hopes of United States rate rise


Dollar dipped against a basket of major currencies on Friday, after weaker-than-forecast data on consumer prices and retail sales in June raised doubts about USA economic growth and whether the Federal Reserve would raise interest rates again in 2017.

The Labor Department said its consumer price index was flat in June after edging down by 0.1% in May.

The so-called core CPI, which strips out food and energy costs, edged up 0.1% in June, matching the increase of the two previous months.

Consumer prices in the USA came in unchanged in the month of June, according to a report released by the Labor Department on Friday. Economists are expecting a quarterly rise of 0.2 percent for annual inflation to be running at 1.9 percent. However, the 10-year Treasury yield and USA dollar continued to head lower.

The benchmark 10-year Treasury yield TMUBMUSD10Y, -2.05% fell 5.1 basis points to 2.296%.

As a result, the odds of another rate hike in December as judged by the futures market fell to 43.1 percent, from 47.3 percent a week ago. The pan-European FTSEurofirst 300 index of leading shares rebounded to rise 0.10 per cent and close at 1520.41.

USA interest rates futures rose as traders pared their viewthe Fed would increase rates again in 2017.

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Among mid-caps, Carillion CLLN.L saw a small relief bounce from heavy losses this week, rising 1.3 percent after the crisis-hit construction and support services contractor hired HSBC as joint financial adviser and corporate broker, amid speculation it is preparing a rights issue. Meanwhile, growth and inflation has started to show with more consistency in Europe and the United Kingdom, and this has led to even more deductive weakness in the Greenback as traders shift rate hike bets in the Euro and British Pound. Interest rate markets are now tipping the first rate hike to come in June 2018 versus the central bank's forecast of September 2019. The yen surged by 0.58%, with dollar/yen trading at 112.60.

The CPI, in particular, will garner interest because "if you take Yellen at her word the Fed is starting to second guess itself as to whether recent weakness is transitory", said ANZ Bank New Zealand senior economist Phil Borkin.

The euro EUR= gained 0.64 percent to $1.468.

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. It was the yield's largest weekly decline since the week ended June 2. "After Fed chair Yellen's somewhat cautious statement for her testimony suggested that the FOMC could ease back in its tightening if inflation persists, this has added anticipation of today's US CPI numbers", commented Richard Perry in a note this morning.

US 10-year yield fell to 2.303 percent, from 2.348 percent late on Thursday.

The most-active USA gold futures for August delivery futures settled up $10.20, or 0.84 percent, at $1,227.50 per ounce.

U.S. West Texas Intermediate (WTI) crude futures CLc1 rose 46 cents to settle at $46.54 per barrel.