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Dollar steady after U.S. inflation data misses estimates

EconomyJun 25, 2021 03:54PM ET
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© Reuters. FILE PHOTO: A U.S. five dollar note is seen in this illustration photo June 1, 2017. REUTERS/Thomas White/Illustration/File Photo

By Karen Brettell

NEW YORK (Reuters) - The U.S. dollar ended unchanged on Friday, erasing an early drop after tamer-than-expected producer price inflation, with investors continuing to evaluate whether that the Federal Reserve will act sooner to snuff out inflation if it persists.

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

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 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.”

Other data showed U.S. consumer sentiment ticked up in June.

The dollar index against a basket of currencies ended unchanged on the day at 91.838, after dropping to 91.524.

Last Friday, the index rose to a two-month high after Fed policymakers on June 16 forecast two rate hikes in 2023, a faster-than-expected timetable to tighten.

This week, the greenback slipped as Fed speakers offered contrasting views on inflation pressures.

The U.S. economy could possibly reach maximum employment and inflation that would merit an interest rate increase next year, but it will be important to watch the data, Boston Federal Reserve Bank President Eric Rosengren said on Friday.

Minneapolis Federal Reserve President Neel Kashkari said he expects high inflation readings will not last and many Americans will return to the labor market in the fall.

Investments that strengthen the labor force and improve economic inclusion can help boost economic growth, said Cleveland Federal Reserve Bank President Loretta Mester.

Infrastructure spending is likely to boost the U.S. economy, though probably not in the short-term.

The British pound fell 0.33% on the day to $1.3875, weakening further a day after the Bank of England made no changes to monetary policy.

The greenback was steady at 110.83 Japanese yen, after reaching a 15-month high of 111.11 on Thursday.

Data showed 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 steady after U.S. inflation data misses estimates
 

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Comments (7)
Alan Rice
Alan Rice Jun 26, 2021 3:44PM ET
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Consumer-based Economies : No longer affordable. Tic-toc.
Junior Moreno
Junior Moreno Jun 25, 2021 10:07PM ET
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There are many more things besides the dollar capable of bringing down the American economy and stock market. For example: Every time the CBOE SKEW index hit 138, the SP500 dropped 10% shortly thereafter. Whenever it reached 157, the SP500 dropped 20% immediately. Today, the CBOE has just reached a record of 170, which indicates proportionally an immediate drop of the SP500 by more than 28%.  However, there is an additional data: In July 2020, the agency Fitch Ratings had already signaled the downgrade of the US rating due to its growing deficit. In 2011, when the US lost the AAA rating, the SP500 dropped 20%.    Therefore, with the CBOE SKEW index hitting a record 170 today, we are about to witness a massive crash of the SP500 from next Monday. I expect an immediate drop in the SP500 of more than 40% very soon... perhaps from next Monday up to end of June.
Ashley Davis
Ashley Davis Jun 25, 2021 10:07PM ET
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I totally agree and people dont jnderstand that it not only just the dollar bringing the economy down.
Mehdi Captain Music
Mehdi Captain Music Jun 25, 2021 10:07PM ET
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Creating economic weakness is good for compensating for government spending.
Michael Dell
Michael Dell Jun 25, 2021 4:34PM ET
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From 2008 0 percent interest rate it took Fed 7 years to raise interest rate by 0.25 in 2015 xD…
Alan Rice
Alan Rice Jun 25, 2021 11:58AM ET
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A Consumer reliant economy ?? No, thank you.
YouTube Account
YouTube Account Jun 25, 2021 1:58AM ET
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hahaha these chickens blocked my comment. Jerome Powell's mom is probably a mod here.
CHADWICK RICHINGTON
CHADWICK RICHINGTON Jun 25, 2021 1:53AM ET
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Americans are about to see what tough times are really like
Fermin Ochotorena
Fermin Ochotorena Jun 25, 2021 1:53AM ET
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Yes. And it comes from so much selfish and foolish immediate gratification. This general behavior is not about to change anytime soon. No political party is willing to address this issue, but each party would claim they have an easy and false solution that we would love. Therefore, reinforcing our bad behavior and making things much worse.
Alan Rice
Alan Rice Jun 25, 2021 1:53AM ET
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Fermin Ochotorena Some times " the followers " must lead.
Jody Darden
Jody Darden Jun 25, 2021 1:53AM ET
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Alan Rice  Whenever that happens everything is already in ruins
Joe Messeri
Joe Messeri Jun 24, 2021 10:38PM ET
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Dollar index will be down to 83 in 7 months
Aux Gold
Aux Gold Jun 24, 2021 10:38PM ET
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I can see that
EHDDyce FC
EHDDyce FC Jun 24, 2021 10:38PM ET
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What? That would force emergency rate hikes, and the market to go down popping it right back up.
Ehizode Uwaifoh
Ehizode Uwaifoh Jun 24, 2021 10:38PM ET
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83 ? before it's to the level rate will be increased and it will rally very fast
 
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