Consumer prices increased less quickly in April than anticipated, according to data released on Wednesday. However, few policymakers have provided any indication as to when rates would drop, which has limited the dollar’s losses this week.
The dollar index, which compares the value of the US dollar to six other currencies, increased by 0.2% on Friday to 104.73, but it was still on course for a weekly fall of around half a percentage point.
As of right now, 46 basis points of rate reduction by the Federal Reserve by year’s end are priced in by futures markets.
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“The comments this week from Fed officials were in our view still indicative of a Fed that would be willing to turn and cut relatively quickly if the evidence becomes available to back it up,” currency analysts at MUFG said in a note.
Even though markets price European rate cuts beginning in June, recent data has shown some upside surprises. Germany’s economy grew more than expected last quarter and investor morale is at a two-year high.
Euro zone consumer inflation data on Friday came in at 2.4% year-on-year in April, in line with a Reuters poll.
The euro fell to $1.0844, down 0.2% for the day. This week, it is still up about 0.7% against the dollar.
According to ECB Vice-President Luis de Guindos, policymakers in the euro zone are more confident that inflation will return to target next year as a result of lessening pricing pressures. This was stated on Friday.
Friday’s mostly dismal Chinese data contributed to the control of market risk sentiment.
Although factory output exceeded predictions, housing values dropped at the highest rate in over nine years and retail sales stagnated.
Sterling edged 0.1% lower to $1.26555. The dollar gained 0.3% on the Japanese yen at 155.9.