Dollar Edged Down Last Week Amidst Inline PCE Data

PCE-based inflation data from the U.S. that came in mostly along expected lines marginally dragged down the 6-currency Dollar Index during the week ended May 31. The U.S. Dollar gained against the euro, the British pound and the Japanese yen but slipped against the Australian Dollar during the period.

In the last week of May spanning May 27-31, the six-currency Dollar Index edged down 0.05 percent. The Index closed at 104.67 on May 31, versus 104.72 a week earlier. The Index had climbed from the week’s low of 104.33 on Tuesday to the week’s high of 105.18 on Thursday.

Data released on Thursday had shown the second estimate of the first quarter GDP growth in the U.S. at 1.3 percent, lower than 1.6 percent in the original estimate. Report released on the same day also showed that the initial jobless claims for the week ended May 25 increased to 219 thousand from 216 thousand in the previous week and market expectation of 218 thousand.

Data for April released by the U.S. Bureau of Economic Analysis on Friday showed the year-on-year PCE Price Index steady at 2.7 percent as widely expected. The core component was also steady at 2.8 percent as expected. The month-on-month PCE Price Index remained steady at 0.3 percent as expected. The core component thereof which was expected to remain steady at 0.3 percent however edged down to 0.2 percent.

The greenback’s losses were limited as despite the mild cooling in inflation, the numbers continue to be above the 2 percent level targeted by the Fed and markets still worry about the Fed keeping interest rates high.

The EUR/USD pair slipped 0.04 percent during the week ended May 31 amidst anticipation ahead of the European Central Bank’s interest rate decision due on Thursday. The ECB is widely expected to announce rate cuts in the June meeting. However, rate cuts beyond June remain steeped in uncertainty. From the level of 1.0845 recorded on May 24, the pair declined to 1.0841 by May 31. The week’s trading range was between 1.0890 recorded on Tuesday and 1.0788 recorded on Thursday.

The GBP/USD pair edged down in the past week amidst a bearish tilt by the sterling. The GBP/USD pair closed trading at 1.2739 on May 31, edging down from the level of 1.2740 recorded a week earlier. The week’s high of 1.2802 was recorded on Tuesday whereas the low of 1.2680 was touched on Thursday.

The AUD/USD pair however rallied 0.38 percent during the week ended May 31, closing at 0.6652 versus 0.6627 a week earlier. Data released during the week had shown an unexpected increase in consumer price inflation. The monthly Consumer Price Index for April which was expected to cool to 3.4 percent from 3.5 percent in the previous month unexpectedly increased to 3.6 percent. Data released during the week also showed a less-than-expected rebound in retail sales. The week’s trading range was between the high of 0.6680 recorded on Tuesday and low of 0.6589 recorded on Thursday.

Despite the massive intervention by the Japanese govt a few weeks earlier, the yen continued to decline against the greenback amidst the resilience of the U.S. economy. The USD/JPY pair closed the week 0.20 percent higher at 157.31, versus the level of 156.99 recorded a week earlier. The pair had earlier traded between 157.79 recorded on Wednesday and 156.38 touched on Thursday.

At the onset of a U.S. data packed week that would inter alia see updates on Manufacturing PMI, job openings, Services PMI as well as non-farm payrolls, the Dollar Index has dropped to 104.53. Ahead of the ECB’s interest rate decision due on Thursday, the EUR/USD pair had jumped to 1.0873. The GBP/USD pair has also increased to 1.2773. The AUD/USD pair has firmed up to 0.6686 whereas the USD/JPY pair has weakened to 156.21.

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