July 19, 2018

Aussie reaches 2-year high on United States weakness

17 July 2017, 12:16 | Austin Hogan

Soon Janet Yellen will most likely try to shrink the Federal Reserve’s balance sheet

Soon Janet Yellen will most likely try to shrink the Federal Reserve’s balance sheet

Gold prices rose Friday, after weaker-than-expected US inflation data eroded the case for the Federal Reserve to raise interest rates in coming months.

Looking ahead, investors are awaiting a host of US economic indicators, including core inflation, retail sales and industrial production for June later in the session for more insight into how the Fed might proceed.

The Dow and S&P 500 both closed at new records while gauges of global stock markets also scaled fresh highs, capping their best week in more than two months. Retail sales unexpected fell 0.2 percent in June while the University of MI consumer sentiment survey missed expectations at 93.1 versus 95 forecast by economists. The trade-weighted index was little changed at 78.11.

Among other precious metals, silver prices dropped 0.4 percent to $15.60 per ounce. The prospects of a hike to the fed funds rate in December is now sitting at 45 percent even though the Fed's guidance is for a third hike this year.

The measure of wireless phone costs fell 0.8 percent in June and is down 13.2 percent in the past year.

Aussie reaches 2-year high on United States weakness
Aussie reaches 2-year high on United States weakness

Joe Duran, CEO of United Capital, said on "Closing Bell" he does not think the Fed will raise rates again this year, despite what Yellen has said.

The 0.2% fall in retail sales was the big surprise and has added to scepticism that the Fed is on top of what is actually happening in the economy.

"She seemed wary of recently slowing inflation and suggested that rates won't need to rise much further to get to a neutral setting", he said. Prices have been posting gains since a solid report issued late last week, which backed the argument for higher interest rates although likely not at a more aggressive pace than the go-slow approach the Fed has signaled.

As a result the FT said the market-implied odds of a third rate increase in 2017 fell below 50% on Friday, "and the dimming prospects weighed on the greenback" and helped the Aussie dollar to 17 month highs.

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