NZ dollar slips as Fed talks up USA inflation, stoking greenback demand

The yield on the benchmark 10-year Treasury note jumped to 2.17% from 2.14% as he spoke. Sterling declined against dollar on Monday as demand for sterling weakened on uncertainty over domestic politics and over Britain’s economic future, as formal Brexit negotiations got under way.

The dollar was subdued after USA homebuilding fell for a third month in May to the lowest in eight months and a barometer of US consumer sentiment unexpectedly fell in early June, prompting concerns about the Federal Reserve’s plans to stick with its monetary policy tightening. The trade-weighted index fell to 77.85 from 78.22. Dudley, a close ally of Fed Chair Janet Yellen, is due to take part in a roundtable with local business leaders in Plattsburgh, New York.”In the wake of Friday’s weak USA data, Dudley could provide insight into whether the Fed is still poised to continue normalising monetary policy”, said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.”My view is that Dudley won’t sound too dovish, and thus allow the dollar’s gradual rise to resume.”Dudley could help clarify why the Fed appeared to ignore a series of soft inflation readings as it marched on with tighter policy last week.The dollar was up 0.1 percent at 110.955 yen”.

The comments increased speculation that there were divisions within the FOMC which could put further rate increases in doubt and EUR/USD consolidated near 1.1200 as narrow ranges dominated. The Aussie held at $0.7593, not far from $0.7640 a level last seen on April 3. Last week’s hike was the central bank’s third in six months. On the data front, Australian sales of new vehicles rose by the most in 11 months in May to hit the highest on record, a promising sign for a pick up in consumer spending in the second quarter.

French stocks outperformed upbeat European indices on Monday following a convincing parliamentary victory for President Emmanuel Macron, while banks rebounded following upgrades and retailers recovered from last week’s losses.

Dow Jones closed up by 0.65 percent, S&P 500 ended up 0.81 percent, Nasdaq finished the day up by 1.38 percent. Unemployment fell to 4.3 percent in May, below what many Fed officials say is sustainable in the long run.

United States gold futures fell 0.4 percent to $1,251.6. U.S. gold futures for August delivery fell 0.2 percent to $1,254.20 an ounce. BrentLCOcv1 settled 1 percent lower at $46.91.