Dollar Index Edges Up Amidst Softer PCE Data

The Dollar Index recorded minor gains during the week ended June 28 in the backdrop of a softening in PCE-based inflation readings. Persisting weakness in the Japanese yen also boosted the 6-currency index. In the past week, the U.S. dollar weakened against the euro, but the Australian dollar as well as the Canadian dollar held their ground against the British pound, the Japanese yen, the Swedish krona and the Swiss franc.

From the level of 105.80 on June 21, the Dollar Index edged up 0.07 percent in a week’s time. The Index which had touched a weekly low of 105.37 on Tuesday climbed to the weekly high of 106.13 on Wednesday. The Index eventually slipped and closed the week at 105.87.

Data released by the U.S. Bureau of Economic Analysis on Friday showed year-on-year PCE Price Index declining as expected to 2.6 percent in May versus 2.7 percent in the previous month. The core component also, as expected, decreased to 2.6 percent from 2.8 percent in the previous month. Likewise, the month-on-month PCE Price Index was flat as expected, edging down from 0.3 percent in the previous month. The core component also matched expectations as it declined to 0.1 percent from 0.3 percent in the previous month.

Despite the softening in the PCE update, the Dollar remained firm at levels reached in the previous week in the backdrop of stronger-than-expected PMI readings.

Amidst the political uncertainty in Europe, the EUR/USD pair rallied 0.21 percent during the week ended June 28. The pair slipped from the high of 1.0747 recorded on Monday to a low of 1.0666 on Wednesday. The pair eventually closed at 1.0713, versus 1.0691 a week earlier. Data released during the week had shown weaker-than-expected readings of business climate as well as consumer confidence from Germany and a softening in consumer price inflation in France.

The GBP/USD pair however edged down during the week ended June 28, as dovish rate cut hints resulted in a bearish outlook on the pound. The GBP/USD pair which had closed at 1.2645 on June 21 slipped 0.02 percent during the week ended June 28 to close at 1.2642. The weekly trading range was wider, between a high of 1.2704 recorded on Tuesday and a low of 1.2612 recorded on Thursday.

Amidst a rebound in consumer confidence, the Australian dollar jumped 0.42 percent against the U.S. dollar during the week ended June 28. From the level of 0.6639 recorded on June 21, the pair rose to close at 0.6667. During the week, the pair oscillated between a high of 0.6690 recorded on Wednesday and a low of 0.6619 recorded on Friday.

The U.S. dollar however rallied against the Japanese yen during the week ended June 28, despite growing speculation of a regulatory intervention. Though the past week commenced with the release of the Summary of Opinions by Bank of Japan that contained hints of a possible rate hike in July, market perception of a dovish BoJ kept sentiment for the yen subdued. The USD/JPY pair closed the week at 160.83 versus 159.79 a week earlier, recording an addition of 0.65 percent. The pair ranged between the low of 158.82 recorded on Monday and the high of 161.28 recorded on Friday. Also swaying sentiment in favor of the greenback was the prospect of a trade war between China and the West.

The ISM Manufacturing PMI from the U.S released this morning revealed an unexpected decline. Fed chair Jerome Powell’s speech and the JOLTS report from labor market are due on Tuesday. The release of the minutes of the recent FOMC as well as the Services PMI are due on Wednesday. The Dollar Index is in this backdrop hovering near 105.64.

The EUR/USD pair has increased to 1.0758 as the French election results revealed a less-than-expected likelihood of expansionary fiscal policies. Meanwhile, Germany’s CPI declined to 2.2 percent, a level lower than expected.

Ahead of U.K.’s general election on July 4, the GBP/USD pair is hovering near 1.2692. Ahead of the release of the minutes of the meeting of the Reserve Bank of Australia, the AUD/USD pair is at 0.6679.

The USD/JPY has touched a 38-year high of 161.46 amidst a downward revision in Japan’s PMI readings for June. The pair is currently at 161.30, even as speculation grows about a foreign exchange intervention by the Japanese Ministry of Finance.

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