Dollar dips ahead of U.S. inflation data

imageEconomy46 minutes ago (Jun 25, 2021 15:15)

© Reuters. FILE PHOTO: Four thousand U.S. dollars are counted out by a banker counting currency at a bank in Westminster, Colorado November 3, 2009. REUTERS/Rick Wilking/File Photo

By Karen Brettell

NEW YORK (Reuters) – The U.S. dollar fell on Friday after data showed that U.S. consumer spending was flat in May, while producer price inflation came in below economists’ expectations.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, held steady following an upwardly revised 0.9% jump in April. Economists polled by Reuters had forecast consumer spending rising 0.4%.

The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, increased 0.5%, below economists’ expectations of a 0.6% increase. In the 12 months through May, the so-called core PCE price index shot up 3.4%, the largest gain since April 1992.

“The most interesting, salient takeaway from today’s data is that we’re not seeing runaway inflation,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York. “The Fed by holding its fire is probably on the right side of the trade at this point.”

The dollar index against a basket of currencies fell 0.26% to 91.598.

It rose to a two-month high last Friday after policymakers at the Fed on June 16 forecast two rate hikes in 2023, indicating that the U.S. central bank will address rising price pressures sooner than previously expected.

The greenback slipped this week, however, as Fed speakers offered contrasting views on whether inflation increases are likely to be sustained.

Infrastructure spending is likely to help boost the U.S. economy after President Joe Biden announced a deal on Thursday, though it is not expected to make an impact in the short-term.

Sterling continued to weaken, a day after the Bank of England made no changes to its monetary policy.

The British pound was last down 0.08% on the day at $1.3909.

The greenback weakened to 110.58 Japanese yen, after reaching a 15-month high of 111.11 on Thursday.

That comes even as data on Friday showed that core consumer prices in Tokyo were unchanged in June from a year earlier.

“Japan is a total outlier when it comes to one of the most crucial data points in the market’s focus right now: inflation. It showed that Japan, unique among the major countries of the world, has no inflation,” Marshall Gittler, head of investment research at BDSwiss, said in a report.

Dollar slips as U.S. consumer spending stagnates

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