Dollar Falls On CPI Data

U.S. Treasury 10-year bond yields fell to their lowest levels
in over four months after a report showed that inflation should not be a factor
ahead of the Fed’s meeting in September. A housing report also supported
clues that the U.S. economy is indeed slowing its growth. The majority of
investors now believe that the Fed will not raise rates in September, on common
sentiment that slowing growth, not inflation, looks to be the biggest challenge
for the U.S. economy. Some are forecasting that the Fed will begin to cut
rates during coming meetings, driving bond prices higher as yields fall.

The dollar continued its fall against the yen and the euro
today, on the news that the rising inflation will not be a problem for the Fed
in September. The housing numbers, too, pointed to a slowing U.S. economy,
which forced investors to evaluate the dollar’s strength in the global market.
In addition to the yen and the euro, the dollar fell against the British pound
and Swiss franc. Europe and Japan are both expected to raise interest
rates, which would signal growing economies abroad. After the PPI and CPI
reports which were released this week in the U.S., the dollar looks to struggle
against most foreign currencies, as investors hedge bearishly against the U.S.

Crude oil futures also dropped on the CPI numbers, which
signal a slowing demand in a country with ample inventories. Crude dropped
1.6% to close at $71.90, a 1-month low for the futures energy contract.
Crude has been steadily declining since a ceasefire agreement was reached in
Lebanon, after crude reached record highs at the beginning of July.
Natural gas staged a rally during the day, but lost all gains to close flat.

The metals traded mixed to close the day. Gold closed up
1%, silver was up 1.6%, copper fell 1.7% and aluminum dropped 0.9%.

The softs mostly rose across the board. Cocoa rose just
over 1%, coffee rose 1.7% and orange juice rose nearly 3%.

Grains mostly fell today. Corn dropped fractionally,
wheat fell 1.4%, soy fell 0.75% but oats stood out, up 1.4%.

The meats rose today, with cattle up fractionally and pork
bellies up nearly 4%.


Core Consumer Prices Rise Less Than Expected (full

Housing Starts And Building Permits Fall In July (full

Oil And Gasoline Inventories Fall Again (full

Industrial Production Shows Relatively Modest Growth (full

John Patrick Lee