Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
USD higher after PCE
The US dollar was stronger in most markets on Friday after a higher inflation reading – the closely-watched PCE number – kept inflation fears front-and-centre.
Headline annual PCE was reported at 2.7% (versus 2.6% forecast) while the core number was recorded at 2.8% (versus 2.7% forecast). However, a wide divergence in the various components of the series illustrates the current uncertainty around the inflation outlook.
The personal consumption and expenditure number is the Federal Reserve’s preferred measure of inflation and remains well above the Fed’s 2.0% target.
The greenback was stronger versus most major currencies with the most substantial gains seen in Asia.
The euro and British pound fell. The kiwi also lost ground.
The AUD/USD, however, extended the gains seen after last week’s hotter than expected local inflation reading and gained 0.2% on Friday.
Yen in meltdown after BoJ
The other big move on Friday was a further meltdown in the Japanese yen with the USD/JPY up 1.6% after the Bank of Japan meeting as the pair accelerated past 158.00 – the highest level since 1990.
The Bank of Japan kept policy on hold after raising rates for the first time in 17 years in March and did little to dissuade markets to stop selling yen. BoJ governor Ueda appeared to mostly dismiss FX worries and said that moves in the yen are usually only temporary, although Ueda did say a weaker yen had a “non-negligible” impact on inflation.
The move in the Japanese yen translated into other markets with the USD/SGD up 0.3% and the USD/CNH up 0.2% as it neared key resistance at 7.3000.
Fed in focus in big week for data
The USD will continue to dominate market focus this week with the Federal Reserve decision due on Thursday morning and the all-important US non-farm employment report due on Friday night.
After last week’s hotter inflation reading, the USD index has climbed back toward six-month highs. If the Fed sounds more concerned about inflation, or if the US jobs market remain strong, the greenback might continue higher.
Otherwise, there’s a number of key releases from other parts of the world this week. Tuesday sees Australian retail sales, Chinese PMIs and Eurozone inflation, while Wednesday brings NZ employment.
USD rebounds after PCE, but Aussie outperforms
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 29 April – 3 May
All times AEST
*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
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