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FOREX-Dollar steadies as strong U.S. inflation curbs chance of aggressive Fed rate cut


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* Dollar regroups after losing ground on dovish Fed chairviews

* Strong U.S. CPI data tempers prospect of 50 bps Fed ratecut

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh (Adds details and quotes, updates prices)

TOKYO, July 12 (Reuters) - The dollar was steady on Friday,having regained some traction against its peers afterstronger-than-expected U.S. inflation data tempered the prospectof an aggressive Federal Reserve interest rate cut later thismonth.

The core U.S. consumer price index excluding food and energycomponents rose 0.3% in June, the largest increase since January2018, data on Thursday showed. urn:newsml:reuters.com:*:nLNSBIEF6Y

The signs of a pick-up in underlying inflation, along withseparate data on weekly jobless claims showing the labour marketremained solid, curbed financial market expectations of a moreaggressive 50 basis point cut at the Fed's July 30-31 meeting.

Markets are still fully priced for a quarter percentagepoint cut as U.S. policymakers seek to support a slowingeconomy.

The dollar was little changed at 108.390 yenJPY= afterrebounding from a low of 107.860 plumbed on Thursday in responseto dovish comments from Fed Chairman Jerome Powell, which had revived the chance of a 50 basis-point cut.

"The dollar bounced back as the strong U.S. CPI got themarket to question the Fed's view on prices and whetherinflation was really as weak as projected," said Takuya Kanda,general manager at Gaitame.Com Research Institute.

"Expectations for a 50 basis point cut had risen afterPowell's comments but were lowered again by the CPI. Until theFed's meeting later this month, the prospect of a 50 basis pointcut will continue ebbing back and forth on each major datarelease."

The dollar index .DXY against a basket of six majorcurrencies stood little changed at 96.972 after retracing muchof its losses on Thursday, when it had briefly stooped to asix-day low of 96.795.

The index hit the low after Powell said in a midweekcongressional testimony that the Fed was ready to "act asappropriate," given the U.S. economy was still under threat fromdisappointing factory activity, tame inflation and a simmeringSino-U.S. trade war.

Comments by Chicago Fed President Charles Evans scheduledlater on Friday and New York Fed President John Williams due onMonday will provide a chance to gauge how dovish the centralbank really is, said Masafumi Yamamoto, chief forex strategistat Mizuho Securities.

"If these Fed officials are not as dovish as Powell, and ifthe New York Fed's manufacturing survey on Monday prove strongerthan forecast, they could show that the dollar weakening inresponse to Powell's congressional testimony was overdone."

The euro EUR= was a shade stronger at $1.1264 but off ahigh of $1.1285 scaled on Thursday prior to the U.S. inflationdata.

The Australian dollar AUD=D4 nudged up 0.1% to $0.6985,adding to the previous day's modest gains.

The U.S. Treasury 10-year yield US10YT=RR , which oftendictates the direction of the dollar, was at 2.125% afterjumping 8 basis points overnight on the strong U.S. inflationdata and a weak 30-year bond auction. (Reporting by Shinichi SaoshiroEditing by Shri Navaratnam) ((shinichi.saoshiro@thomsonreuters.com; Reuters Messaging:shinichi.saoshiro.reuters.com@reuters.net+813-6441-1774))






This article appears in: Politics , Stocks , World Markets
Referenced Symbols: EUR



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