Investing.com – The dollar pared some of its losses against a basket of major currencies on Thursday amid signs that the recent slowdown in inflation could be transitory, strengthening the Federal Reserve's case to adopt a more aggressive monetary policy tightening path.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell 0.30% at 92.93.
The dollar recovered some of its early session losses following a raft of data showing an improvement in manufacturing and the labor market, while the trend of slowing inflation subsided.
The Core Price Consumer Expenditure (PCE) Index – the Fed’s preferred measure of inflation – rose 1.4% in October year-on-year, compared to a 1.3% rise in the previous month, while September inflation was revised upward to 1.4% from 1.3%.
On the jobs data front, number of individuals who filed for unemployment insurance for the week ended Nov. 25, fell by 2,000 to 238,000.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.3% in line with economists’ expectations.
The upbeat inflation report supported the Fed’s view that the slowdown in inflation was transitory, lifting expectations for more aggressive monetary policy tightening in 2018.
“Fed officials have shown varying degrees of discomfort with the soft inflation figures in recent months, and the tentative evidence of a turnaround will be sufficient to soothe the nerves of all but the most dovish” policy makers, Stephen Stanley, chief economist at Amherst Pierpont Securities LLC in New York, said in a note.
Sterling, meanwhile, continued to limit gains in the dollar amid Brexit-related positive commentary.
GBP/USD rose 0.66% to $1.3497, just shy of fresh two-month highs.
EUR/USD added 0.35% to $1.1888, while EUR/GBP fell 0.31% to £0.8809 despite Eurozone inflation missing expectations.
USD/JPY rose 0.41% to Y112.38, while USD/CAD rose 0.41% to C$1.2887.