Dollar Slips Against Euro Ahead of US Inflation Data

The dollar edged down against the euro on Monday (May 16) in profit taking after recent gains, as traders awaited a key US inflation report on consumer prices.

“More than anything, I think it’s a little bit of profit taking,” said Omer Esiner of Commonwealth Foreign Exchange, citing a quiet day in economic news. Last week, the dollar climbed to a two-week high “in the wake of some relatively strong data, particularly Friday’s retail sales number,” he said.

The dollar slipped to US$1.1318 per euro around 2100 GMT Monday, from US$1.1309 at the same time Friday. The greenback, however, rose 0.4 per cent 109.06 yen and the euro also advanced against the Japanese currency.

The April rebound in US retail sales eased some doubt about the strength of the US economy following a dismal first quarter, lending some support to the Federal Reserve’s policy body, the Federal Open Market Committee, to raise interest rates later this year.

Still, markets generally do not foresee an FOMC rate hike at the Jun 14-15 policy meeting.

“On the back of a weaker US dollar and rising energy prices through the first four-plus months of the year, market participants are anxiously waiting to see if signs of rising price pressures turn up in the April US consumer price index report,” said Christopher Vecchio, currency analyst at DailyFX.

The Labour Department is scheduled to issue the CPI data at 1230 GMT on Tuesday.

Kathy Lien of BK Asset Management said the unevenness of the US economy underscored by recent data only confirms the overall expectation that the Fed will keep interest rates unchanged next month.

“Until some piece of data significantly alters the market’s expectations for Fed policy, we expect the dollar to remain confined to its recent range against the euro and Japanese yen,” she said.

Courtesy : channelnewsasia.com