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Dollar Edges Lower; Inflation Concerns Prompt Strong Week

ForexMay 14, 2021 03:00AM ET
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© Reuters.

By Peter Nurse

Investing.com - The dollar edged lower in early European trade Friday, taking a breather after the week’s gains, as traders digest the latest inflation data and the potential impact on Federal Reserve policy.

At 3:05 AM ET (0805 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was down 0.2% at 90.532, but still around 0.5% higher so far this week. 

EUR/USD traded 0.3% higher at 1.2109, GBP/USD was up 0.1% at 1.4068, and USD/JPY was down 0.1% at 109.39. Additionally, AUD/USD rose 0.2% to 0.7744, while NZD/USD rose 0.3% to 0.7192.

Thursday saw the release of factory gate price data in the U.S., with the producer price index rising 0.6% in April after surging 1.0% in March. The annual figure shot up 6.2%, the biggest year-on-year rise since the series was revamped in 2010 and followed a 4.2% jump in March. 

This strong data adds to Wednesday’s stunning jump in consumer prices, suggesting inflationary pressure is building up in the United States as vaccine rollouts prompt a reopening of an economy bursting at the seams with stimulus.

That said, Federal Reserve officials have been at pains to point out that they had expected a spike in inflation and that it would prove to be temporary, the latest being Fed Governor Christopher Waller.

“The factors putting upward pressure on inflation are temporary, and an accommodative monetary policy continues to have an important role to play in supporting the recovery,” Waller told a virtual event Thursday. “We will not overreact to temporary overshoots of inflation.”

Benchmark 10-Year U.S. Treasury yields failed to rise to any great degree after the PPI data, and now trade around 1.65%.

“Although we are likely to see blockbuster growth in the second half of the year, economic growth will likely slow next year, to strong but less impressive growth rates,” said analysts at ABN Amro, in a note. “Overall, we do not expect sustained high inflation over the coming years, but it is certainly the risk to watch.”

For today, the focus will be on U.S. retail sales for April, which should remain strong after the impressive 9.7% rise in March, as well as industrial production numbers and consumer sentiment for May.

Dollar Edges Lower; Inflation Concerns Prompt Strong Week
 

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Comments (5)
Kevin Avila
Kevin Avila May 15, 2021 2:55PM ET
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Inflation explosion is the US will cause intrest rate explosion as well... Dollar will rise quickly...
Philani Dhlamini
Philani Dhlamini May 15, 2021 2:55PM ET
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I agree with you on that one, USD technical are predicting bullish dollar in the next coming days to months.
Antaux Rollins
Antaux Rollins May 14, 2021 6:59AM ET
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I believe what they meant is the market has been manipulated over the past several days and they can't say it .
Ominous Owl
Ominous Owl May 14, 2021 5:36AM ET
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The same news is used to explain two different price actions on separate days. Hilarious.
Isaac Imeakhai
Isaac Imeakhai May 14, 2021 5:36AM ET
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how what do mean explain
arthur santos
arthur santos May 14, 2021 5:36AM ET
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absolutely right! it seems they take the readers for stupid!
Sirma Voivoda
Sirma Voivoda May 14, 2021 5:36AM ET
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What exactly do you mean? Please, I'm interested. Let's analyze it.
Vitaly Murashov
Vitaly Murashov May 14, 2021 4:53AM ET
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You don't have to write it a few times a day daily. There's no optimism in that
Vitaly Murashov
Vitaly Murashov May 14, 2021 4:53AM ET
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because you become part of the reason
Stan Mok
Stan Mok May 14, 2021 4:25AM ET
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Nice
 
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