US Dollar Retreats After PCE Data Points to Cooling Inflation
The US Dollar in Early European Trade
The US dollar retreated in early European trade on Friday as a key inflation release added to expectations that US interest rates have peaked.
At 04:40 ET (09:40 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% lower to 103.212, after clocking its weakest monthly performance in a year in November.
Dollar Falls After PCE Release
The eagerly awaited Personal Consumption Expenditures (PCE) index rose 3% in October from a year ago, according to data released on Thursday, falling from 3.4% the previous month.
This index is widely seen as the Federal Reserve’s preferred gauge of inflation, and although the reading was still above the Fed’s 2% target, the trajectory is clearly lower.
Main Economic Release and Euro Movement
The main economic release on Friday is the ISM data, while traders will also pay close attention to comments from Fed Chair Powell later in the session, looking for clues of the central bank’s rate outlook.
In Europe, the euro rose 0.1% to 1.0897, with the euro edging higher after steep overnight losses, helped by data showing the broad-based downturn in eurozone manufacturing activity eased slightly last month, while remaining firmly in contraction territory.
Eurozone Manufacturing Activity and House Prices
HCOB’s final PMI rose to 44.2 in November from October’s 43.1, above a preliminary estimate of 43.8. Importantly, the downturn in Germany’s dominant manufacturing sector eased in November, increasing for the fourth month in a row.
Pound sterling rose 0.3% to 1.2666, heading back towards the recent three-month top of 1.2733, after data from Nationwide indicated that house prices rose unexpectedly in monthly terms for the third time running in November.
Yen Set for Another Weekly Gain
In Asia, the yen traded 0.3% lower to 147.74, on course for its third straight week of gains against the dollar, pulling it away from the three-decade low of 151.92 it touched in the middle of November.
The yuan edged higher to 7.1376, after a private survey showed that manufacturing rebounded unexpectedly in November. But the reading contrasted with official data released on Thursday, which showed a sustained contraction in the sector.
