The dollar fell across the board on immediate reaction on US data on Friday. Inflation disappointed in September, falling below expectations.
Inflation in September rose 0.5%, missing forecast for 0.6% rise, but showing slightly better result from the previous month when inflation was up 0.4%.
Core CPI also fell below expectations on 0.1% rise in September vs forecasted 0.2%, which is also result of August.
Annualized CPI was up 2.2% in September, falling below expectation at 2.3%.
However, September’s results show the biggest inflation increase in eight months, as gasoline prices soared in wake of disruption of production last month, caused by hurricanes, however, underlying inflation remained anemic.
Persisting weakness of inflation continues to worry policymakers, as inflation continues to undershoot Fed’s target at 2% for over five years.
US policymakers were divided regarding the inflation in FOMC September’s meeting, as some board members insisted in more evidence of inflation growth before starting to further tighten the policy.
Today’s weak results would put Fed’s hawks under fresh pressure, as the central bank signaled in their September’s meeting that it will hike rates once more in 2017 and two more times in 2018.
US Retail Sales made their biggest increase in two and a half years in September, mainly due to strong demand for building materials after hurricanes devastated areas in US states Florida and Texas, as well increased sales of motor vehicles and gasoline.
Retail Sales surged by 1.6% m/m in September after falling by 0.1% previous month but slightly missed the forecast at 1.7%.
Core Retail Sales were up 0.5% in September, beating forecast at 0.4% and coming well above previous month’s 0.1% rise.
The dollar fell against its major counterpart as stubbornly low inflation raises a big question mark above the wide expectations for rate hike in December.
The EURUSD rose to session high at 1.1874, coming close to key barriers at 1.1879 and 1.1906, break of which would generate fresh bullish signal for the single currency.
Sterling retested session high at 1.3323 and shows scope for further advance, while USDJPY probed below key support at 111.80, clear break of which would spark further weakness.
Australian dollar surged to new over two-weeks high at 0.7885, after cracking key resistance at 0.7874.
Spot gold jumped on weaker dollar, disappointed by inflation numbers and cracked psychological $1300 resistance, extending uninterrupted rally for the sixth straight day.