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Weekly Forex Focus: 15 - 19 May 2017

The U.S. dollar fell against a basket of the other major currencies on Friday as weak U.S. data on inflation and retail sales saw investors temper expectations for more rate hikes by the Federal Reserve.
Data on Friday showed that U.S. retail sales grew less than expected last month, and core inflation dipped, raising doubts over whether the Fed can hike rates two more times this year. Retail sales rose 0.4% in April, the Commerce Department said, falling short of economists’ expectations for a 0.6% increase. At the same time, the Labor Department reported that the annual rate of inflation slowed to 2.2% in April from 2.4% in March. Annual core inflation, which strips out food and energy costs, fell to 1.9%, the lowest since October 2015. Consumer prices rose 0.2% last month, rebounding from a 0.3% drop in March.

Gold prices were higher on Friday to end the week little changed as the weaker dollar boosted demand for the precious metal. Oil futures settled nearly flat on Friday, but still registered the first weekly gain in a month on the likelihood that key crude producers will extend output cuts beyond an agreed-on June deadline when they meet later this month.

Key U.S. economic data in the week ahead could provide further evidence if the world’s largest economy is strong enough to withstand a rate hike as early as next month, with the Empire State and Philly Fed manufacturing surveys in focus.

Meanwhile, China is to release industrial production data amid recent signs of cooling in the world's second largest economy. Elsewhere, the euro zone is to publish revised data on first-quarter economic growth as traders look for further signs on the strength of the region's economy and hints on when the European Central Bank will start withdrawing stimulus.

In the U.K., market participants will be looking ahead to reports on consumer prices, employment and retail sales for further indications on the continued effect that the Brexit decision is having on the economy.

Preliminary data on Japanese first-quarter growth will also be in focus.

Fi24h Editorial Board
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