The dollar cuts its gains against the euro this Friday, March 31, after US data showed that the growth in personal consumption spending slowed down in February, supporting hopes of less aggressive monetary policy from the Federal Reserve.
He spent of US consumers increased moderately in Februaryprobably as compensation for the rebound of the previous month, and although the inflation showed signs of cooling, remains elevated, so the Fed could raise interest rates once more this year.
Besides, the Eurozone inflation posted the biggest drop ever recorded in Marchbut the pressures underlyingwhich exclude food and energy, are acceleratedwhich puts pressure on European Central Bank to keep raising rates.
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He dollar index, that compares the US bill with a basket of six currencies, rises 0.3% to 102.1254 units. However, it is headed for a monthly drop of 2.7 units in a month marked by the financial crisis and the revision of the monetary policy of the central economies.
The data has left to markets positioned in favor of more rate hikes in the euro zone than in the United Statesyes
“In terms of inflation, I think the Fed is in a better position than the ECB,” he said. stuartcoleChief Macroeconomics Economist at Equiti Capital.
“Yes, inflationary pressures are above target, but if you look at the United States, both headline and core inflation are moving in the right directionalbeit painfully slowly. But in the euro zone there is a divergence that makes policymaking very difficult,” Cole said.
He euro falls 0.4% to $1.0859 after knowing the data. The common currency had fallen as much as 0.37% to a low of $1.08645 at the start of the session.
The Fed is expected to raise the overnight interest rate in Maybut even so, it is expected to reverse quickly and end the year with lower rates than they started it, according to futures contracts linked to the official interest rate of the US central bank.
“My hunch is that the Fed will raise another 25 basis points in May, and that will be it…but I can see the ECB raising aggressively through the summer,” he said. cole, from Equity Capital. “This could be positive for EUR/USD (euro/dollar) from an interest rate standpoint.”
Futures traders pegged to the Federal Reserve’s key interest rate on Friday slightly reduced their bets that the US central bank will raise its benchmark rate by a quarter of a percentage point in May.
The markets now see the chances of a raise in the rally like a heads or tails, after the government reported a slight easing in a key indicator of inflation.
Federal Reserve Funds Futures Prices now reflect a 50% chance of a quarter percentage point rate hike in May, vs. 56% before the data.
The current rate target range is 4.75%-5.00%.
The pound sterling it remains practically stable on Friday at $1.2393, but on track to end the week up 1.3% against the dollar.
Source: Ambito
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