EUR / USD fell sharply sliding to its lowest level in three weeks Friday, as core inflation in the US It increased mostly annual rate of more than three years, reinforcing the arguments hardliners for further increases in interest rates by the Federal Reserve.
The currency pair traded between 1.0912 and 1.1069 before settling at 1.0932, down 0.0086 or 0.78% on the session. The euro closed lower against the dollar in four of the last five and eight of the last 10 sessions. Since up to three-month highs earlier this month, the euro has fallen more than 3.2% against its US counterpart.
EUR / USD probably won support at 1.0538, the low of December 3 and found resistance at 1.1496, the high of October 15 ..
EUR / USD probably won support at 1.0538, the low of December 3 and found resistance at 1.1496, the high of October 15 ..
Friday morning, the US Department Trade in a monthly report said that personal income and consumer spending rose 0.5% in January, eclipsing both consensus estimates’. Driven by substantial increases in wages and salaries, personal income increased for the third time in four months, after strong gains in December. Consumer spending, meanwhile, moved constantly paced above a peak of 1.2% in purchases of durable goods.
More revealing is the expenditure (PCE) index of personal consumption increased 1.3% in January, from level 12 in the previous month, an improvement of 0.7 compared to the level of December. The core PCE index, which excludes food and energy prices, rose 0.3% from the previous month, extending the monthly gains since December. On an annual basis, PCE increased by 1.7% compared to its level in January 2015, also 0.3% higher than the December reading.
While PCE inflation has remained under the specific objective of the Fed for each month during the past three years, reading in January hit the top of the central tendency estimate the central bank for 2016. Fed President Janet Yellen it has continuously reiterated that the long-term inflation will continue to move toward the specific goal of the Fed’s 2%, as temporary factors a stronger dollar and record energy prices low back. At the meeting (FOMC) December Federal Open Market Committee, the committee referred to in its median forecast that inflation will not reach 2% until 2018.
When the FOMC meets again next month, the committee will release its quarterly long-term economic projections, also known as the “dot-plot”. The assessment includes projections far-reaching changes in real GDP, unemployment, inflation and the interest rate benchmark Fed. From the FOMC ended a policy of zero interest rates seven years in December, threats of a global economic slowdown and extreme volatility in financial markets around the world have made the US central bank to reconsider its pace of tightening. The FOMC followed by the celebration of the objective of the Federal rate at a level between 0.25% and 0.50% Funds range at a later session in late January.
But with the labor market almost full employment, strong inflation data could force the Federal Reserve to reconsider the timing of the next rate hike. In his January statement, the Fed stressed that it will continue using a data-driven when deciding whether it is appropriate to raise interest rates approach.
But with the labor market almost full employment, strong inflation data could force the Federal Reserve to reconsider the timing of the next rate hike. In his January statement, the Fed stressed that it will continue using a data-driven when deciding whether it is appropriate to raise interest rates approach.
“A committee data-driven, so that the decisions of the meeting by meeting, is likely to surprise the markets from time to time,” said Fed Governor Jerome Powell in a speech to the US Monetary Policy Forum on Friday morning. Hours later, Lael Brainard, a colleague of Powell in the FOMC remarked that the tight financial conditions are the equivalent of “three rate hikes.”
Any rate increases by the Fed this year are seen as bullish for the dollar as foreign investors accumulate in the greenback in order to take advantage of higher yields.
Separately, the Commerce Department revised upward the growth in real GDP in the fourth quarter to 1.0%, above the initial estimates of 0.7%. In Spain and France, in February inflation data both were slightly below consensus estimates.
Elsewhere, the GBP / USD fell 0.61% to 1.3870 after falling to a fresh seven previous years in the session. From the United Kingdom received special status in the EU last week, the pound has fallen more than 3.2%.
The US dollar index, which measures the strength of the greenback versus a basket of six major currencies, rose more than 0.80% to an intraday high of 98.29, before closing at 98.13. In session highs, the index reached its highest level in almost three weeks.
