By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) – The U.S. dollar rose on Friday after data showed a key inflation measure came in line with forecasts while personal spending and income rose, supporting expectations that the Federal Reserve is likely to cut interest rates next month by a smaller will decrease by 25 basis points, instead of 50 bps.
Some market participants had expected the bigger cut next month, believing the Fed was behind on easing and would have to catch up.
US interest rate futures on Friday implied a 31% chance of a 50 basis point rate cut next month, down from Thursday’s 35% probability, LSEG calculations showed, with the market seeing the first easing at its September meeting of the Fed in more than four years. .
Markets have also priced a cut of around 100 basis points by the end of 2024.
The dollar rose 0.8% to 146.09 yen after the inflation data, marking the biggest daily gain in two weeks. The stock rose 1.2% this week and was on track for the biggest weekly gain since mid-June.
But the dollar remained 2.6% lower in August, falling against the Japanese currency for the second month in a row.
Friday’s data showed the personal consumption expenditure (PCE) price index rose 0.2% last month, in line with expectations, after an unchanged 0.1% increase in June. In the 12 months to July, the PCE price index rose 2.5%, matching June’s gains.
Consumer spending was also 0.5% higher last month, after growing 0.3% in June.
“It’s clear we’re going to get a rate cut, and I think whether it’s 25 or 50, that’s still debatable and it’s all going to depend on next week’s employment numbers,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. York.
‘I foresee three rate cuts and I see the possibility of half a percent in September, depending on employment data. If not, it will be a 25 basis point cut in September and then a 50 basis point cut in December. .”
The , a gauge of its value against six major peers, climbed to a 10-day high after inflation data and was last up 0.3% at 101.7. On a weekly basis, the index rose 1%, which is on track for its best weekly performance since early April.
However, this month the index fell 2.6%, the weakest level since November last year.
Overall, the dollar continued to benefit from month-end flows, selling off after Fed Chairman Jerome Powell gave the clearest signal yet at a meeting in Jackson Hole last week that the US central bank will meeting in September will lower interest rates.
Separate economic reports showed the University of Michigan’s monthly consumer sentiment index survey rose to 67.9 in August, up from an eight-month low of 66.4 in July, marking a four-month decline. US consumers see inflation continuing to moderate in the coming year, the survey showed, with a gauge of price growth expectations released on Friday at the lowest level in August since late 2020.
The dollar briefly fell in value after the report.
In other currencies, the euro fell 0.2% against the dollar to $1.1050. This week, the index is down 1.3%, on track for its biggest weekly loss since April.
However, the euro rose by 2.1% in August, the best monthly performance since November 2023, while the European Central Bank is still on course to cut interest rates again next month.
The common currency fell to its lowest in more than a week on Thursday, ending down 0.4% after German inflation cooled more than expected, boosting investor expectations of ECB cuts.
China’s yuan rose to a 14-month high against the dollar, the biggest monthly gain since November, amid growing corporate demand for the Chinese currency as expectations for US interest rate cuts grow.
The rate rose to 7.0825 per dollar before last changing hands at 7.0920, which is on track for an increase of about 1.9% for August.
Currency
bid
prices at
30
August
08:02
pm GMT
Description RIC Last US Pct YTD Pct High Low
at Close Change bid
Last
Session
Dollar 101.67 101.36 0.32% 0.30% 101.78 101.
index 24
Euro/pop 1.1053 1.1077 -0.21% 0.14% $1.1095 $1.1
am 044
Dollar/Year 146.16 144.96 0.89% 3.69% 146.25 144.
no. 685
Euro/yen 1.1053 160.6 0.6% 3.81% 161.62 160.
2
Dollar/SW 0.85 0.8473 0.33% 1% 0.851 0.84
iss 68
Sterling/ 1.3131 1.317 -0.27% 3.21% $1.32 $1.1
Dollars 044
Dollar/Approx. 1.3478 1.3485 -0.03% 1.69% 1.3509 1.34
nadian 66
Australia/Thurs 0.6766 0.6798 -0.44% -0.73% $0.6817 $0.6
lar 752
Euro/Swiss 0.9394 0.9385 0.1% 1.16% 0.9417 0.93
s 81
Euro/Star 0.8417 0.8411 0.07% -2.9% 0.8428 0.84
ling 01
New Zealand 0.625 0.6257 -0.13% -1.11% $0.6275 0.62
Dollar/Do 31
llar
Dollar/no 10.6028 10.4989 0.99% 4.61% 10.6409 10.4
road 767
Euro/Norwegian 11.7197 11.6308 0.76% 4.42% 11.7565 11.6
yes 137
Dollar/SW 10.2664 10.2239 0.42% 1.98% 10.2936 10.2
Eden 09
Euro/Sweden 11.348 11.3231 0.22% 2.01% 11.382 11.3
en 17
