Dollar Edges Higher; U.S. Inflation Data Looms Large By Investing.com

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© Reuters. By Peter Nurse Investing.com – The dollar rose in European early trading Thursday amid cautious trading with traders looking for key US inflation data and an ECB meeting for clues to future direction. At 2:55 AM ET (0755 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, rose 0.1% to 90.180, continued to fluctuate closely around the psychologically important level of 90, and came in around 0 , Traded 1% lower at 1.2167, fell from the one-week high of 1.2218 seen during the previous session, fell 0.1% to 109.55, fell 0.1% to 1.4112 while it rose 0.1% at 0.7737. Activity in the forex market was limited throughout the week, with major currencies largely staying in the range, with traders cautiously awaiting the release of US Department of Labor consumer price data for May. Last month’s report showed consumer prices rose the fastest in nearly 12 years in April, and this challenged the Federal Reserve’s forecast that current inflationary pressures would be temporary and therefore monetary stimulus should continue for some time. Another strong report would put pressure on the central bank to act and potentially push US Treasury bond yields higher in favor of the dollar. Economists estimate they are up 0.4% from the month of May, representing a 4.7% annual increase for the headline. The one, which excludes price hikes from the volatile food and energy sectors, is up 0.4% m / m and 3.4% y / y. “We are likely to see another inflation shocker,” Nordea analysts said in a note, pointing out two main components seen in the core inflation report, used car and rental price increases. “If the rental of the housing component hits 2.5% (we think that’s likely in the coming months) and the used car component prints at 50% YoY, then you already have a cocktail that could push core inflation above 4%. At 3.4%, this is well above the early consensus. That’s a risky scenario for May, but it looks feasible by the June report at the latest. ”The other major event on Thursday is the latest political decision, the one where investors are carefully on the lookout for signs of an impending slowdown in their bond buying program. “While the Governing Council remains divided, the majority will likely support a decision to continue buying bonds near the current pace as the recovery is not yet on a solid footing,” Nordea said in another press release. Elsewhere, it rose 0.1% to 1.2115 after a decision on Wednesday to keep policy rates at all-time lows while maintaining the current rate of bond buying. This move brings the focus to the next month’s meeting as expectations rise for a further reduction in contingency measures. The central bank was among the first developed countries to adopt a less expansionary policy in April when it accelerated the schedule for a possible rate hike and scaled back its bond purchases.

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