Hannah Lang
NEW YORK (Reuters) – The dollar eased on Friday and is on track for its first monthly decline in 2024 after data showed U.S. inflation rose as expected in April, providing no clarity on how the US Federal Reserve will soon be able to cut spending. interest rates.
The price index for personal consumption expenditures (PCE) rose 0.3% last month, the Commerce Department’s Bureau of Economic Analysis reported Friday, matching the unrevised gain in March.
“These numbers give no indication that the Fed is achieving its goal,” said Joseph Trevisani, senior analyst at FX Street. “Its target has already been stated, so markets are willing to give it some time… but I don’t think that time is unlimited.”
The price was last down 0.12% at 104.64.
Since March 2022, the Fed has raised borrowing costs by 525 basis points in an attempt to cool demand across the economy. Financial markets initially expected the first rate cut to come in March, but it was then pushed back to June and now September.
Official data showed on Thursday the US economy grew at an annual rate of 1.3% from January to March, down from the previous estimate of 1.6% after a downward revision in consumer spending.
While inflation is “moving in the right direction,” said Kyle Chapman, currency markets analyst at Ballinger Group, “policymakers are certainly not out of the woods yet.”
“I would caution against over-interpreting one month of data,” he said.
INFLATION IN THE EUROZONE
The euro rose after data showed euro zone price pressures accelerated faster than expected in May, complicating the European Central Bank’s outlook.
The euro rose 0.13% to $1.0847. Inflation data for France released earlier on Friday, as well as data for Germany and Spain earlier this week, were slightly above expectations.
These figures did not change the market’s view that the ECB will cut rates at its meeting next week.
A June 6 ECB rate cut appears imminent, according to all 82 economists polled by Reuters, with most forecasting further cuts in September and December.
Elsewhere, the yen weakened, lifting the dollar 0.24% to 157.210, but below this week’s four-week high, as Japan’s finance minister repeated warnings of excessive currency volatility.
Japan’s Ministry of Finance released data on Friday confirming that Japanese authorities spent 9.79 trillion yen ($62.2 billion) on foreign exchange market interventions to support the yen over the past month, keeping the currency from testing new lows but unlikely to reverse . long term decline.
“The intervention disclosed by the Ministry of Finance between April 26 and (Thursday) was slightly larger than market estimates based on BOJ reports, but not large enough to raise concerns about the war chest being so reduced that it would limit further action . ” said Carl Sciamotta, chief market strategist at Corpay.
Data on Friday showed core consumer inflation in Tokyo accelerated in May, but price increases excluding the impact on fuel slowed, adding to uncertainty about the timing of the Bank of Japan’s next rate hike.