Investing.com – The U.S. dollar was under pressure Friday amid a rampant euro as leaders of Europe reached an agreement on a migration deal, easing pressure on German Chancellor Angela Merkel.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell by 0.71% to 94.33.
European Union member states Friday struck a migration deal, agreeing on several measures to tackle the migrant crises in the EU including stepping up border security and setting up holding centers to handle asylum seekers.
The deal was cheered by traders as it eased political uncertainty within the bloc, sending the EUR/USD sharply higher, to $1.1677, up 0.94%.
Ahead of the deal, member states had been in constant disagreement over the handling of migrate crisis: Italy – one of the first port of calls for migrants who manage to survive the trek across the Mediterranean – had threatened to veto any deal if member states did not take "concrete steps" to share the influx of migrants.
In German Chancellor Merkel's own backyard, meanwhile, coalition partner, Christian Social Union, had threatened to end the government coalition amid differing views on measures to tackle the migrant crisis.
The rampant euro overshadowed mostly positive U.S. economic data including a report showing U.S. inflation hit the Fed's target, paving the way for the Fed to continue on its rate-hike cycle.
The Federal Reserve's preferred inflation measure – the personal consumption expenditures (PCE) price index excluding food and energy – rose 2% in the 12 months through May.
The Chicago business barometer, a closely-watched indicator by the Institute for Supply Management (ISM), rose to a reading of 64.1 in June from 62.7 the prior month, topping economists' estimates for a reading of 60.0.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.2% last month, the Commerce Department said on Friday, but that was slower than economists had forecast.
But analysts at Stifel downplayed the weakness in consumer spending, citing income growth offered little evidence this was the start of a trend lower in consumer spending, adding that the stronger inflation data would support calls for a faster pace of Federal Reserve rate hikes.
"From the Fed’s point of view, stable wages coupled with a further rise in prices offers additional justification for a potentially accelerated pathway for rates," Stifel said Friday.
GBP/USD rallied 0.89% to $1.3194 after the UK economy grew faster-than-expected in the first quarter, renewing investor expectations for a Bank of England rate hike this year.
Safe-haven currencies traded mix as USD/JPY rose 0.25% to Y110.77, while USD/CHF fell 0.57% 0.9917.
USD/CAD fell 0.81% to C$1.3142 as a rally in oil prices failed to stem losses in the loonie.