By Hannah Lang
NEW YORK (Reuters) – The dollar was lower on Friday and on track for its first monthly decline in 2024 after data showed U.S. inflation rose in line with expectations in April, offering little clarity on how quickly the U.S. Federal Reserve Reserve will be able to make cuts. interest rates.
The personal consumption expenditures (PCE) price index rose 0.3% last month, the Commerce Department’s Bureau of Economic Analysis said Friday, matching unchanged gains from March.
“These numbers do not give any indication that the Fed is achieving its goal,” said Joseph Trevisani, senior analyst at FX Street. “The target has already been stated, so the markets are willing to give it some time… but I don’t think that time is unlimited.”
The latter fell by 0.12% to 104.64.
The Fed has raised borrowing costs by 525 basis points since March 2022 in an effort to cool demand across the economy. Financial markets initially expected the first rate cut to take place in March, but it was subsequently pushed back to June and now to September.
Official data showed on Thursday that the US economy grew at an annual rate of 1.3% from January to March, down from the previous estimate of 1.6% following downward revisions to consumer spending.
While inflation is “heading in the right direction,” says Kyle Chapman, FX market analyst at Ballinger Group, “policymakers are certainly not out of the woods yet.”
“I would caution against over-interpreting one month’s data,” he said.
INFLATION IN THE EURO ZONE
The euro rose after data showed price pressures in the euro zone accelerated faster than expected in May, complicating the outlook for the European Central Bank.
The euro rose 0.13% to $1.0847. French inflation figures released earlier on Friday, and German and Spanish figures earlier this week, came in slightly higher than expected.
The figures have not changed the markets’ view that the ECB will cut rates at its meeting next week.
According to all 82 economists surveyed by Reuters, an ECB rate cut on June 6 appears certain, with a majority predicting further cuts in September and December.
Elsewhere, the yen weakened, leaving the dollar up 0.24% at 157.210, but lower than this week’s four-week high, after Japan’s finance minister repeated warnings about excessive currency volatility.
Japan’s Finance Ministry released data on Friday confirming that Japanese authorities spent 9.79 trillion yen ($62.2 billion) on currency market interventions last month to support the yen. a decline in the longer term.
“The intervention announced by the Ministry of Finance between April 26 and (Thursday) was slightly larger than market estimates derived from the Bank of Japan accounts, but not large enough to raise fears of a war chest so small is that further action is limited. ,” said Karl Schamotta, chief market strategist at Corpay, in a note.
Data on Friday showed core consumer inflation accelerated in Tokyo in May, but price growth excluding the fuel effect declined, raising uncertainty over the timing of the Bank of Japan’s next rate hike.
