US Dollar Falls Before CPI Data as Treasuries Rise, Stocks Decline

Frankfurt (May 22)  The dollar weakened and Treasuries rose before a report forecast to show U.S. inflation remained subdued. European stocks fell from a three-week high while oil trimmed the longest run of weekly gains on record.

The Bloomberg Dollar Spot Index fell 0.3 percent at 6:27 a.m. in New York, paring its first weekly advance since the period ended April 10. The yield on 10-year Treasuries declined three basis points to 2.17 percent and the rate on Germany’s bund dropped four basis points to 0.60 percent. The Stoxx Europe 600 Index fell 0.4 percent and Standard & Poor’s 500 Index futures were little changed. Chinese shares capped the best week this year. U.S. oil slipped 0.6 percent, paring its 10th week of gains.

Federal Reserve Chair Janet Yellen speaks on the economy after data that’s estimated to show the consumer price index fell to 0.1 percent in April from 0.2 percent a month earlier. Mixed U.S. economic reports have prompted investors to push back estimates for when the Fed will begin raising rates, helping to drive equities to all-time highs. Following talks with Greek Prime Minister Alexis Tsipras, German Chancellor Angela Merkel said greater efforts were needed to unlock bailout funds.

“We’re seeing an exhaustion in the mini dollar rally we had earlier this week,” said Daragh Maher, a foreign-exchange strategist at HSBC Holdings Plc in London. “U.S. rate expectations have been pushed pretty far into the future.”

The Bloomberg dollar index, which tracks the greenback against 10 major peers, has climbed 1.5 percent this week after a report on Tuesday showed U.S. housing starts jumped to a seven-year high. It fell Thursday as existing home sales trailed estimates and jobless claims increased.

Selloff Stalls

The dollar fell versus all 13 of its 16 major peers today, with the biggest losses coming against the Swedish krona and Norwegian krone. The euro strengthened 0.5 percent to $1.1163 and the yen gained 0.2 percent to 120.81 per dollar.

Gains in German bonds left the 10-year bund yield, the euro area’s benchmark, two basis points lower for the week. In the previous four weeks the yield surged to 0.62 percent on May 15 from 0.08 percent on April 17 amid a global debt rout.

Ireland’s bonds were among euro-area securities posting the biggest gains, as the 10-year yield dropped four basis points to 1.27 percent. Spanish and Italian 10-year bond yields were little changed, at 1.75 percent and 1.83 percent, respectively.

The Stoxx 600 dropped 0.4 percent as gains in the euro curbed earnings prospects for exports. Benchmark gauges in Germany and Ireland led declines in Europe, losing at least 0.5 percent.

Cie. Financiere Richemont SA fell 1.8 percent after the maker of Cartier jewelry and Montblanc pens reported an unexpected decline in April sales. Swatch Group AG lost 2.5 percent.

Areva SA declined 4.3 percent after a report that Engie won’t buy the French builder of atomic plants.

Goldman Speculation

Vodafone Group Plc gained 4.1 percent as Goldman Sachs Group Plc said the phone company is more likely to sell than buy assets.

S&P 500 E-mini futures expiring in June were little changed. The gauge is up for a third week, its longest streak since February.

Hewlett-Packard Co. climbed 0.9 percent in German trading after reporting quarterly profit that topped analysts’ estimates as corporate spending on servers picked up. Deere & Co. and Campbell Soup Co. report earnings today.

The MSCI Emerging Markets Index advanced 0.7 percent, trimming losses this week to 0.3 percent. A Bloomberg gauge of 20 developing-nation currencies gained for the first time this week, leaving it down 1.2 percent over the period.

The Shanghai Composite Index jumped 2.8 percent, extending gains this week to 8 percent. Weak manufacturing data spurred speculation the government may escalate measures to stimulate the economy, sending the gauge to the best weekly advance in five months.

Record Run

The Hang Seng China Enterprises Index rose 2.1 percent to the highest since May 5. The Shenzhen Composite Index was poised for its best week since 2008.

Oil headed for the longest rising streak since futures trading started in 1983 after U.S. crude stockpiles shrank for a third week.

West Texas Intermediate futures fell to $60.38 a barrel, paring its weekly rise to 1.4 percent. Brent crude dropped 0.3 percent to $66.32.

U.S. crude inventories fell by 2.7 million barrels last week, the longest run of losses since September, according to Energy Information Administration data. Production dropped 1.2 percent to 9.3 million barrels a day, the biggest contraction since July.

Iron ore was poised for its largest weekly decline since early April on concern that rising output from the world’s largest producers will exceed demand from China, widening a global surplus. Ore with 62 percent content delivered to Qingdao has dropped 5.6 percent this week to $57.91 a dry metric ton, according to Metal Bulletin Ltd.

Gold advanced 0.7 percent to $1,213.28 an ounce, paring the biggest weekly loss since April. Silver gained 0.8 percent and platinum added 0.4 percent.

Source: Bloomberg