Daily Currency Update

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Dollar lower after inflation data

USD - United States Dollar

Inflation rose again in May, according to the Personal Consumption Expenditures (PCE) Price Index, climbing to 3.9% from 3.6% on an annual basis, compared to expectations of 4%. The PCE index measures the change in the price of goods and services purchased by consumers, excluding food and energy. The US dollar edged lower against its major counterparts after the news. The US Dollar Index fell 0.22% to 91.61 at the time of writing.

On Thursday, initial jobless claims data fell slightly short of expectations, falling 7,000 to 411,000, alleviating concerns about the US Federal Reserve tapering stimulus. A reading of over 200,000 is a sign of a healthy labour market.

Key Movers

Positive economic data continued to be released from the Eurozone, which has been a boost for the euro. The German Gfk Consumer Climate indicator was released on Friday morning, posting a figure of -0.3%, which is the highest level since August 2020. The euro strength could continue as the European council meeting later plays out. EURUSD was up 0.28% at 1.1963 at the time of writing.

On Thursday Bank of England Governor Bailey gave no indication that the monetary policy committee (MPC) are planning on changing interest rates in the short term. The pound fell by 0.4% against the US dollar and hit session lows of 1.3888 yesterday. Bailey suggested that there is no issue with inflation sitting above the 2% target, and it might even reach 3% for a temporary period. The pound was only down 0.04%, trading at 1.3912 this morning.

The Australian dollar broke above 0.76 US cents this morning, continuing to recover from last week’s dramatic dip. With little of note on the domestic macroeconomic ticket, the direction was again driven by the shifting reflation narrative. AUDUSD was up 0.38% to 0.76108 at the time of writing.

Expected Ranges

EUR/USD: 1.1925 - 1.1967 ▲

GBP/USD: 1.3891 - 1.3937 ▼

AUD/USD: 0.7573 - 0.7614 ▲

USD/CAD: 1.2289 - 1.2338 ▼