United States consumer prices were unchanged in June and retail sales fell for a second straight month, pointing to tame inflation and soft domestic demand that diminished prospects of a third interest rate increase from the Federal Reserve this year.
Reaction was largely muted to a story by Politico that Trump is increasingly unlikely to nominate Yellen next year for a second term, and National Economic Council Director Gary Cohn is the leading candidate to succeed her. The pan-European FTSEurofirst 300 index of leading shares rebounded to rise 0.10 per cent and close at 1520.41.
The core CPI data came in below expectations of a 0.2% rise, which likely will further reduce odds of another Federal Reserve rate hike in coming months.
Janet Yellen's recent cautious commentary reflects the facts about inflation, which are that both headline and, especially core inflation, are slowing, and slowing in a sustained trend, at that. The market is being primarily supported by Yellen's remark that the central bank would only gradually tighten monetary policy, curbing speculation that interest rates would rise a couple of times this year.
Core Inflation on a month-on-month basis (ie June compared to May) is also showing signs of plateauing. Inflation has climbed just 1.6 percent from a year ago.
EARNINGS WATCH: Companies in the US and in Asia will begin reporting their quarterly financial results and give their earnings forecasts for upcoming quarters next week. The British pound rose sharply against the greenback on Friday, climbing more than 1 percent after data further undermined expectations for more hikes in US interest rates.
FED WATCH: Yellen rehashed her key message in her comments to Congress on Thursday, speaking of challenge posed by the dual risks of inflation: prices rising too slowly and prices accelerating too quickly.
The report showed another notable decrease in energy prices, which slumped by 1.6% in June after tumbling by 2.7% in May.
Chief economist Etsuko Yamashita said that if the US CPI would be weaker than expected, it could not only shift USD/JPY below 113 but make a new range lower than 113 instead. Inflation came-in flat versus an expected.2% gain, and retail sales fell by.2% against the expectation for a.1% gain. Americans also cut back on spending at restaurants and bars, as well as on hobbies. The consumer is employed, but retail sales aren't going very fast. Retail sales rose 2.8 per cent year-on-year in June.
Weak auto sales, which have been down in the first half of 2017, were not to blame this time: excluding that volatile category, sales were still down 0.2 percent.
The Retails Sales month-on-month reading is slightly misleading given it mostly oscillates within a range because a sharp increase or decrease in sales is not usually sustainable over a long period.
The dollar was little changed against a group of peers early on Friday, as currency investors remained cautious ahead of US inflation data due later in the session, which is expected to set the greenback´s near-term direction.
Growth in the second quarter likely got a boost from the industrial sector of the economy.