Dollar slides as mixed U.S. data highlights uncertain path


Article content

NEW YORK — The dollar dropped to a three-week low in choppy trading on Friday, as

investor concerns about recession outweighed inflation worries, for now, amid a mixed batch of economic

data.

There was also a lot of month-end position-squaring, analysts said.

Earlier, U.S. economic numbers showed that inflation continued its red-hot rise in June, keeping the

Federal Reserve on track to raise interest rates as aggressively as it deems necessary.

The personal consumption expenditures (PCE) price index jumped 1.0% last month, the largest increase

Advertisement 2

Article content

since September 2005 and followed a 0.6% gain in May. In the 12 months through June, the PCE price index

advanced 6.8%, the biggest gain since January 1982.

Excluding the volatile food and energy components, the PCE price index shot up 0.6% after climbing 0.3%

in May.

The dollar initially rose on the inflation numbers, but gains fizzled amid the final University of

Michigan report showing consumers’ inflation expectations slipped in July.

Federal Reserve Chairman Jerome Powell had mentioned the Michigan survey last month as key behind the

pivot to the more aggressive rate posture.

The greenback was also partly weighed down by data showing the Chicago manufacturing index falling to a

23-month low of 52.1 from a prior low of 56.0, according to Action Economics.

Advertisement 3

Article content

In afternoon trading, the dollar index, a measure of its value against six major currencies, slid 0.3%

to 105.89. Earlier, it slid to a three-week trough of 105.53.

“Traders are engaging in some quarter-end position-squaring, preparing for a period in which inflation

and growth rates subside, tilting interest differentials against the dollar,” said Karl Schamotta, chief

market strategist at payments company Corpay in Toronto.

“Next week’s (U.S.) jobs report looms as a potential volatility catalyst, and no one wants to be caught

offside if job creation slows more than expected,” Schamotta added.

Another key indicator, the U.S. employment cost index (ECI), also increased. The ECI, the broadest

measure of labor costs, rose 1.3% last quarter after accelerating 1.4% in the January-March period, the

Advertisement 4

Article content

Labor Department said on Friday.

The index is widely viewed as one of the better gauges of labor market slack and a predictor of core

inflation.

Action Economics, in its blog after the U.S. data, said the ECI was one of the metrics that alarmed the

Fed and caused its pivot to a 75 basis points hike.

Post-data on Friday, rates futures markets have priced in a 72% chance of a 50 basis points hike at the

Fed’s September policy meeting, with a 28% probability of a 75-bps rate increase..

The rates markets also predict that the fed funds rate will peak in February 2023. Pre-U.S. data,

futures were betting that top in the fed funds rate would hit this December.

The euro rose 0.2% versus the dollar to $1.0213.

Against the yen, the dollar slid 0.7% to 133.42 yen. The greenback also posted its largest

Advertisement 5

Article content

monthly percentage fall since July 2020.

The yen was the primary short bet of the widening interest rate differential trade between the United

States and its global peers, with net shorts on the currency, despite a recent pullback, above historical

averages at $5.4 billion.

========================================================

Currency bid prices at 4:02PM (2002 GMT)

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Dollar index 105.8800 106.2100 -0.30% 10.680% +106.6700 +105.5300

Euro/Dollar $1.0220 $1.0196 +0.23% -10.11% +$1.0255 +$1.0147

Dollar/Yen 133.3200 134.2300 -0.66% +15.84% +134.6700 +132.5050

Euro/Yen 136.25 136.88 -0.46% +4.55% +137.3200 +135.5600

Advertisement 6

Article content

Dollar/Swiss 0.9516 0.9550 -0.32% +4.35% +0.9593 +0.9504

Sterling/Dollar $1.2177 $1.2184 -0.05% -9.96% +$1.2245 +$1.2065

Dollar/Canadian 1.2805 1.2805 +0.01% +1.29% +1.2855 +1.2790

Aussie/Dollar $0.6987 $0.6993 -0.09% -3.89% +$0.7031 +$0.6912

Euro/Swiss 0.9727 0.9737 -0.10% -6.19% +0.9753 +0.9700

Euro/Sterling 0.8390 0.8374 +0.19% -0.12% +0.8415 +0.8369

NZ $0.6289 $0.6291 -0.02% -8.11% +$0.6329 +$0.6222

Dollar/Dollar

Dollar/Norway 9.6615 9.7335 -0.65% +9.77% +9.7435 +9.6635

Euro/Norway 9.8820 9.9125 -0.31% -1.31% +9.9722 +9.8548

Dollar/Sweden 10.1571 10.1995 -0.20% +12.63% +10.2425 +10.1292

Euro/Sweden 10.3811 10.4020 -0.20% +1.50% +10.4260 +10.3699

(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Saikat Chatterjee in London; Editing by

Robert Birsel, Toby Chopra, Will Dunham and Jonathan Oatis)

Advertisement

Comments

Postmedia is committed to maintaining a lively but civil forum for discussion and encourage all readers to share their views on our articles. Comments may take up to an hour for moderation before appearing on the site. We ask you to keep your comments relevant and respectful. We have enabled email notifications—you will now receive an email if you receive a reply to your comment, there is an update to a comment thread you follow or if a user you follow comments. Visit our Community Guidelines for more information and details on how to adjust your email settings.



Source link

Comments are closed.