US PCE Data Will Be Eyed for Policy Clues
The US dollar moved lower during the European trading session on Monday morning. As investors are losing hope that the Federal Reserve will taper its bond-buying program, the greenback is approaching three-month lows.
In the early morning, the Dollar Index, which tracks the performance of the US dollar against six major currencies, slipped 0.1% at 89.975, thus skirting dangerously close to the three-month low of 89.646 hit on Friday last week.
The US dollar was pushed higher at the beginning of the last week, after minutes from the April Federal Reserve meeting suggested that the Federal Reserve officials wanted to discuss tapering bond purchase. Yet soon investors realized that this tapering would not occur any time soon as Federal Reserve Chairman Jerome Powell assured the world that the time to discuss a reduction in quantitative monetary easing had not come yet.
Investors continue worrying about increasing inflation and, therefore, will be carefully scrutinizing US PCE data coming in on Friday. US Personal Consumption Expenditures data will be the crucial test for markets this week. This is so because the core PCE, excluding food and energy, is the Federal Reserve’s favorite inflation measure for its 2% flexible average target. The core PCE was 1.8% up in the twelve months to March. If it goes higher, the Fed’s decision to keep up asset purchases at their current price will be tested. Another data that can influence the Federal Reserve’s decision is May’s advanced trade balance, also published on Friday.
Meanwhile, the EUR/USD pair edged 0.1% up at 1.2184, thus retreating from a three-month top of 1.2245 reached on Wednesday. USD/JPY shed 0.1% to trade at 108.81. GBP/USD advanced 0.1% to 1.4154. AUD/USD gained 0.1% to trade at 0.7737.