Dollar Spikes Up As Core Inflation Improves
May 22 2015 - 09:50AM
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The U.S. dollar rallied against its major rivals on Friday,
erasing early losses, as core inflation in April rose most since
January 2013, providing case for a Fed rate hike later this
year.
The Labor Department report showed that the core consumer price
index rose by 0.3 percent in April following two consecutive 0.2
percent monthly increases.
Economists were expecting an increase of 0.2 percent.
The CPI inched up by 0.1 percent on month in April, matching
economist estimates. In March, the inflation rose by 0.2
percent.
The Federal Reserve Chair Janet Yellen is due to speak on the
economic outlook before the Greater Providence Chamber of Commerce
Economic Outlook at 1:00 pm ET.
The greenback had been trading in a negative territory since the
beginning of today's deals, as Thursday's weak economic data had
cast doubts over economy's strength.
The greenback advanced to a new 4-week high of 1.2269 against
the loonie, up by 0.60 percent from Thursday's closing quote of
1.2196. The next likely resistance for the greenback-loonie pair is
seen around the 1.25 mark.
Bouncing off from an early 3-day low of 1.1207 against the euro,
the greenback rose to a 2-day high of 1.1075. If the greenback
extends gain, 1.10 is possibly seen as its next resistance level.
At yesterday's close, the pair was quoted at 1.1110.
The final data from Destatis showed that Germany's economic
growth eased as estimated in the first quarter largely due to the
weakness in foreign trade.
Gross domestic product grew 0.3 percent sequentially in the
first quarter, slower than the 0.7 percent expansion seen in the
fourth quarter.
The greenback, having fallen to 1.5689 against the pound at 2:00
am ET, reversed direction with pair trading at 1.5537. The pair was
trading at 1.5659 at yesterday's close. Continuation of the
greenback's uptrend may lead it to a resistance surrounding the
1.545 mark.
Bank of England Deputy Governor Minouche Shafik said
productivity growth is likely to resume and factors pulling
inflation down could be temporary.
"I think it is reasonable to expect that resumption in
productivity growth to come over the next year or so as the
continued narrowing of slack in the labor market raises the
incentive to increase output by increasing output per worker," she
said at the Association of Corporate Treasurers Annual Conference
on Friday. But the degree of uncertainty around the timing is
high.
The greenback spiked up to 0.9425 versus the Swiss franc, its
strongest since April 30, from an early 3-day low of 0.9285. The
greenback is likely to challenge resistance around the 0.96 level.
The greenback closed yesterday's trading at 0.9366 versus the
franc.
The greenback strengthened to more than 2-month highs of 121.54
against the yen and 0.7827 against the aussie, off its early 2-day
lows of 120.63 and 0.7931, respectively. On the upside, 123.00 and
0.77 are possibly seen as the next resistance levels for the
greenback against the yen and the aussie.
The U.S. currency trimmed its early decline against the NZ
dollar, trading at 0.7301. This is a 1.26 percent increase from its
early 3-day low of 0.7394. Extension of the greenback's uptrend may
lead it to a resistance surrounding the 0.725 mark. The pair ended
Thursday's trading at 0.7343.
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