The US dollar clung to modest gains against the euro on Friday, after data showed falling US consumer spending and cooling inflation, and as investors awaited a slew of central bank meetings in the coming days.
Consumer spending, which accounts for more than two-thirds of US economic activity, dropped 0.2 percent last month, the US Department of Commerce said on Friday.
Data for November last year was revised lower to show spending slipping 0.1 percent instead of gaining 0.1 percent, as previously reported.
Photo: Reuters
Economists polled by Reuters had forecast consumer spending dipping 0.1 percent.
The commerce department reported that the personal consumption expenditures (PCE) price index — the US Federal Reserve’s preferred gauge for inflation — rose 0.1 percent last month after a similar rise in November.
“US PCE landed pretty much as expected and has very little impact on the Fed’s upcoming decision,” Monex Europe foreign exchange analysis head Simon Harvey said.
“The latest inflation data has allowed Fed officials to guide markets to a slower pace, and given their preference on the duration of restrictive monetary policy, we expect a moderation in price pressures to result in the Fed taking rates to a terminal level of 5 percent by March,” Harvey said.
Traders of futures tied to the Fed’s policy rate kept bets on Friday that the US central bank will raise interest rates just once more beyond a widely expected quarter-point hike after its meeting on Tuesday and Wednesday. The current target range is 4.25 to 4.5 percent.
The euro was 0.17 percent lower at US$1.08725, but not far from the nine-month high of US$1.09295 touched on Monday.
For the week, Europe’s common currency was up 0.2 percent.
Against the yen, the US dollar was 0.25 percent lower at ￥129.89, as hot Tokyo inflation readings spurred bets that a hawkish pivot from the Bank of Japan (BOJ) could be in the offing.
Data showed consumer price inflation in Japan’s capital accelerated to a nearly 42-year peak this month, piling pressure on the BOJ to step away from stimulus.
Attention now turns to a slew of central bank policy decisions, with the Fed, the European Central Bank and Bank of England (BOE) all due to make rate decisions as they judge what policy adjustments might be required in their battle with rampant inflation against a tough global economic backdrop.
There is “a lot of event risk on the immediate horizon. Not necessarily in terms of rates for next week, but more the forward guidance central banks will provide,” Harvey said.
The pound slipped 0.12 pound to US$1.2397, amid investor worries that the British economy’s slowdown might prompt the BOE to end its tightening cycle soon, a move that might weaken the pound in the short term.
Meanwhile, bitcoin was 1.5 percent higher on Friday at US$23,337, finishing the week up about 2.6 percent, its fourth straight weekly gain, following big losses spurred by the high-profile collapse of the FTX cryptoexchange.
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