Dollar falls broadly on retreat in U.S. yields despite surge in U.S. inflation data: May 31, 2021
Although the greenback initially extended its recent winning streak against its peers on Friday and hit session highs after release of stronger-than-expected U.S. inflation data, usd quickly erased its gains in New York on strong retreat in U.S. Treasury yields due to month-end buying by portfolio managers and traders also shrugged off a sharp rise in U.S. core inflation above the Fed’s target.
Reuters reported U.S. consumer prices accelerated in the year to April, with a measure of underlying inflation blowing past the Federal Reserve’s 2% target, reflecting pent-up demand as the economy reopens, supply constraints and technical factors.
Consumer prices as measured by the personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, increased 0.7% last month after gaining 0.4% in March, the Commerce Department said on Friday. In the 12 months through April, the so-called core PCE price index vaulted 3.1%. That followed a 1.9% year-on-year gain in March. Economists polled by Reuters had forecast the core PCE price index rising 0.6% in April and surging 2.9% year-on-year. The core PCE price index is the Fed’s preferred inflation measure.
Versus the Japanese yen, the dollar initially traded sideways in Asia and found renewed buying at 109.79 at early European morning and rose to a fresh 6-week high of 110.19 on broad-based usd’s strength after the release of strong U.S. inflation data before retreating to session lows of 109.75 in tandem with U.S. yields, price last traded at 109.85 near the close.
The single currency traded narrowly in Asia and despite rising from 1.2172 to 1.2201, the pair then met renewed selling and tumbled to a near 2-week low of 1.2133 in New York morning on usd’s broad-based strength after release of U.S. inflation data but price quickly erased intra-day gain and rallied to session highs of 1.2204 on active short covering triggered by retreat in U.S. Treasury yields.
The European Commission’s economic sentiment index rose to 114.5 points in May from 110.5 in April, beating expectations in a Reuters poll of an improvement to 112.1. It was the highest level of the index since January 2018. Optimism in services, which make up two thirds of the euro zone economy, rose the most to 11.3 points from 2.2, far above expectations of a rise to 7.5.
The British pound traded broadly sideways in Asia initially. Despite rising from 1.4173 to 1.4205 in early European morning, cable then erased intra-day gains and tumbled to session lows of 1.4137 in early New York trading before staging a strong rebound in tandem with euro to 1.4200.
Data to be released this week:
Australia market holiday, Japan industrial order, industrial output, retail sales, consumer confidence, housing starts, China NBS manufacturing PMI, New Zealand NBNZ business outlook, NBNZ outlook activity, UK market holiday, Italy CPI, Germany CPI, HICP, Canada current account, producer prices and U.S. market holiday on Monday.
Australia AIG Manufacturing index, manufacturing PMI, building permits, business inventories, current account, net exports contribution, RBA interest rate decision, New Zealand building permits, GDT price index, Japan business capex, Jibun Bank manufacturing PMI, China Caixin manufacturing PMI, Germany retail sales, markit manufacturing PMI, unemployment change, unemployment rate, U.K. nationwide house price, markit manufacturing PMI, Swiss retail sales, GDP, manufacturing PMI, Italy markit manufacturing PMI, unemployment rate, GDP, France markit manufacturing PMI, EU markit manufacturing PMI, HICP, unemployment rate, Canada GDP, markit manufacturing PMI, U.S. redbook, markit manufacturing PMI, construction spending, ISM manufacturing PMI, Dallas Fed Manufacturing business index on Tuesday.
New Zealand terms of trade, import prices, export prices, U.K. BRC shop price index, Australia GDP, France current account, budget balance, EU producer prices, U.S. MBA mortgage application, redbook, ISM New York Index, Canada building permits on Wednesday.
Australia AIG construction index, services PMI, retail sales, trade balance, imports, exports, Japan services PMI, New Zealand ANZ business confidence, ANZ activity outlook, China Caixin services PMI, Italy markit services PMI, France markit services PMI, Germany markit services PMI, EU markit services PMI, U.K. markit services PMI, U.S. ADP employment change, initial jobless claims, continuous jobless claims, labor costs, productivity, markit services PMI, ISM non-manufacturing PMI on Thursday.
Japan all household spending, U.K. markit construction PMI, EU retail sales, U.S. non-farm payrolls, private payrolls, unemployment rate, average earnings, durables ex-defense, durables goods, factory orders, durables ex-transport, Canada employment change, unemployment rate, labor productivity rate, Ivey PMI on Friday.
