US Treasury yields rise as Oil strength offsets weak Retail Sales
US Treasury yields advanced on Friday during the North American session after reversing their course following the release of US Retail Sales data, which disappointed investors. Meanwhile, the lack of news from the Middle East kept Oill prices higher, amid fears of a resumption of hostilities.
On Friday, US Treasury yields surged as strength in oil prices spurred a rise in yields. This occurred despite weak retail sales, which fell -0.6% month-over-month, missing expectations of 0.1% growth. The decline was driven by a contraction in online sales, as Amazon delayed Prime Day from July to June. Gasoline prices also fell.
Meanwhile, the University of Michigan Consumer Sentiment index declined to 51.0 in August, reflecting waning consumer confidence, while inflation expectations remained steady. The 2-year Treasury note yield fell slightly, while the US Dollar Index dropped over 0.31% to 99.63. Markets anticipate a 63% chance of a Federal Reserve rate hike at the December 2026 meeting.
The upcoming economic data from the US will include housing data, ADP employment figures, jobless claims, and flash PMIs. Central banks set base lending rates to maintain price stability, typically around a 2% core inflation rate. In this context, higher interest rates can strengthen a country's currency and weigh on the price of gold, as gold becomes less attractive compared to interest-bearing assets.
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