U.S. economic data released on Friday (29th) was mixed, with inflation indicators favored by the Federal Reserve (Fed) picking up, but consumer inflation expectations fell slightly. The dollar fell to three-week lows against major currencies as investors’ recession fears temporarily overshadowed inflation fears at this stage.Japanese Yenstrong rise, dollar againstJapanese YenThe biggest monthly drop since July 2020.
ICE, which tracks the dollar against six major currencies, was late in New York US dollar index (DXY) fell 0.3 percent to 105.89, after falling as low as 105.53 earlier, its worst loss since July 19.
The US Commerce Department announced on Friday that the annual growth rate of the core personal consumption expenditures (PCE) price index in June was 4.8%, up from the previous month and higher than market expectations, and the monthly growth rate also rose from 0.3% to 0.6%. This is the inflation indicator that the Fed prefers for decision-making.
The dollar rallied immediately after the PCE data, but pared gains after the University of Michigan reported that consumer inflation expectations for July had cooled. In June, Powell cited U.S. inflation expectations as the key to making the Fed more aggressive in raising interest rates.
On the same day, the Labor Department released the Employment Cost Index (ECI), the broadest measure of labor costs, which rose 1.3% in the second quarter, down slightly from 1.4% in the first quarter.
The ECI is used to assess labor market slack and forecast core inflation. Action Economics analyzed that the ECI, which had set off alarm bells for the Fed, was one of the keys to the previous move to a 3-yard rate hike.
The dollar also came under selling pressure following the release of the Chicago manufacturing index, which fell to 52.1 from 56, a 23-month low.
The mixed data underscores the uncertain outlook for the U.S. economy. Karl Schamotta, chief market strategist at Corpay, said the U.S. nonfarm payrolls report for July next week could spark market volatility.
The dollar’s depreciation is also linked to the end-of-quarter unwinding, as investors enter a period of preparation for slower inflation and economic growth, which will move interest rate differentials against the dollar, Schamotta said.
After a flurry of economic data on Friday, interest rate futures markets forecast a 72 percent chance of a 2-yard (50 basis point) rate hike by the Fed in September and a 28 percent chance of a 3-yard rate hike.
The interest rate futures market also predicts that the Fed’s cycle of interest rate hikes will peak in February 2023, a delay from December this year before the announcement.
With the weak dollar,EURUp 0.2% against the dollar to 1 EURAgainst $1.0213.
dollar againstJPYDown 0.7% to 133.42 JPYAgainst the dollar, this month’s decline was the heaviest since July 2020.
The interest rate gap between the United States and other countries has been widening,JPYConsistently the most bearish currency, the net short position is now slightly down at $5.4 billion, still well above the historical average.
As of Thursday (28th) at about 6:00 Taiwan time Price:
- US dollar indexReported at 105.8269. -0.34%
- EURExchange rate against the US dollar (EUR/USD) at 1 EURConvert to $1.0225. +0.30%
- GBPExchange rate against the US dollar (GBP/USD) at 1 GBPConvert to $1.2175. +0.00%
- AUDExchange rate against the US dollar (AUD/USD) at 1 AUDConvert to $0.6984. -0.06%
- dollar againstCanadian Dollars (USD/CAD) exchange rate is quoted at 1.2794 for 1 US dollar Canadian Dollars。-0.09%
- dollar againstJapanese Yen (USD/JPY) exchange rate quoted at 133.19 USD Japanese Yen。-0.83%