Treasury Yields Fall On Weak Inflation, Retail Sales

An aging population and lagging population will make it hard for the US to hit Donald Trump's growth target according to Janet Yellen

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 U.S. economic growth and whether the Federal Reserve would raise interest rates again in 2017.

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.

Lower costs for gas, airline tickets, new and used cars and wireless mobile phone plans kept US consumer prices flat in June, evidence that inflation remains muted. Economists are expecting a quarterly rise of 0.2 percent for annual inflation to be running at 1.9 percent.

Paul Ashworth, Chief US Economist at Capital Economics, said, "Earlier this week, Chair Janet Yellen reiterated that the Fed would be watching the incoming inflation data particularly closely over the coming months".

USA two-year yields slid as well, down to 1.339 percent, from Thursday's 1.367 percent, after sliding to a three-week trough of 1.323 percent.

Markets expectations are for both core and headline inflation to stay at 1.7%.

The Australian dollar rose 0.4 percent to $0.7758, well on track to post its best weekly performance in four months.

It is unlikely in such circumstances that the Federal Reserve will vote to raise interest rates again anytime soon.

The euro vaulted to a 14-month high of $1.14895 in Asian trade.

"Caution on the part of consumers comes despite a solid job market and booming equity markets and is feeding into core inflation through price wars on cell phone service, airfares, cars, clothing", she told Business Insider. The drop came after the USA data raised doubts about U.S. economic growth and whether the Fed will hike rates again this year.

Up until this week, Fed officials had translated the recent moderation in prices as transitory but following Yellen's dovish tilt on Wednesday and today's weak numbers, policy makers will now have to reconsider whether additional rate hikes are warranted this year.

UK's benchmark FTSE 100 closed down by 0.7 percent, the pan-European FTSEurofirst 300 ended the day down by 0.01 percent, Germany's Dax ended down by 0.2 percent, France's CAC finished the day down by 0.1 percent.

The New Zealand dollar held onto its overnight gains but was headed for a 0.8 percent weekly decline as investors await several United States economic indicators, including inflation numbers.

The Dow Jones Industrial Average .DJI rose 84.65 points, or 0.39 percent, to 21,637.74.

The Fed's preferred measure of inflation, the personal consumption expenditures index, has also been slipping. The 10 yr yield is down by 5 bps and the 2s/10s spread is narrowing by 2 bps. It earlier fell to 2.279 percent, its lowest since June 30.

The greenback edged down 0.2 percent to 1134.30 against Korean won.

West Texas Intermediate (WTI) crude futures settled up 46 cents, or 1 percent, at $46.54 per barrel.

Indeed a cursory look at the EUR/USD chart, which has extended its uptrend into the 1.14s recently, supports a continuation higher, which would be commensurate with a weaker Dollar profile.