Investing.com – Take a peek at the top 5 things that rocked U.S. markets this week.
The dollar slumped to a 10-month low as economic jitters resurfaced
The dollar slumped to a 10-month low against a basket of global currencies on Friday, after inflation and retail sales data undershot forecasts, raising concerns about the strength of the U.S. economy.
The greenback was under pressure throughout week, after Federal Reserve chair Janet Yellen suggested that the pace of U.S. interest rates would be gradual, dashing expectations of the central bank adopting an aggressive rate hike path.
The Fed "continues to expect that the evolution of the economy will warrant gradual increases in the federal funds rate over time," Yellen said in her prepared testimony.
Yellen noted, however, that the federal funds rate "would not have to rise all that much further" to reach a neutral level.
Gold snapped a 5-week losing streak
Gold futures snapped a 5-week losing streak on Friday, benefiting from a slump in the dollar and US bond yields, as investor expectations about the pace of rate hikes fell, following a week of timid U.S. economic data and dovish comments from Fed chair Yellen.
Consumer and wholesale inflation missed economists' forecasts, while Yellen’s comments earlier the week that interest rates do not need to be lifted too much to reach a neutral level weighed on U.S. yields, signalling reduced optimism about the pace of rate hikes.
The U.S. 10-Year fell to 2.319, down 1.22%, lifting sentiment for gold.
In a subdued interest rate environment, investor appetite for gold strengthens as the opportunity cost of holding the precious metal reduces relative to other interest-bearing assets such as bonds.
Bank of Canada raised rates for first time in seven years
USD/CAD fell to a fourteen-month low of C$1.2644 this week, after the Bank of Canada raised rates from 0.5% to 0.75% for first time in seven years.
In a statement accompanying the rate decision, the central bank pointed to an improving economy, as one the reasons for its decision to increase its key benchmark rate.
Adding to the positive sentiment on the oil-linked Canadian dollar was a rebound in oil prices, as crude futures settled more than 5.2% higher for the week.
Crude notched 5.2% weekly gain
A raft of positive data suggesting that higher demand for oil could offset oversupply in the second half of the year helped oil prices rebound this week, as crude futures posted a 5.2% weekly gain.
On Wednesday, the Energy Information Administration released its weekly inventories report showing crude stockpiles fell by a bigger-than-expected 7.6m barrels for week ended July 7.
Sentiment on oil was further boosted on Thursday, when the International Energy Agency revised up its oil demand forecast from the previous month, noting that stronger consumption in the second half of year could offset the glut in supply.
US banks kicked off earnings season
Three of the six biggest U.S. banks – JPMorgan Chase & Co (NYSE:JPM), Citigroup Inc (NYSE:C) and Wells Fargo & Company (NYSE:WFC) kicked off second quarter earnings on Friday, reporting profits that topped Wall Street estimates.
Weak outlook concerning mortgage lending, however, offset the strong set of results.
The trio of better than expected earnings came ahead of reports from Goldman Sachs Group Inc (NYSE:GS), Morgan Stanley (NYSE:MS) and Bank of America Corp (NYSE:BAC) due next week, and fuelled expectations of a solid quarter of earnings, spurring a rally in U.S. stocks.