Dollar rose on Friday after US personal consumption expenditure inflation rate rises more than expectations

27 Feb 2023 , 09:31 AM

Dollar rose on Friday after US personal consumption expenditure inflation in January increased by more than expectations. 

The dollar index, which compares the value of the dollar to that of six important rival currencies, was at 105.17, just below the seven-week high of 105.32 reached on Friday on stronger-than-expected statistics. The index is on pace to end a four-month losing streak with a 3% gain for February.

According to statistics released on Friday, the personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred measure of inflation, surged 0.6% last month after rising 0.2% in December.

According to the Commerce Department, consumer spending, which makes up more than two-thirds of all economic activity in the United States, increased by 1.8% last month.

According to current market expectations, U.S. interest rates will reach a top of 5.4% in July and stay over 5% through the end of the year.

Nonetheless, Fed policymakers speaking on Friday did not advocate for a return to the large rate hikes of last year, indicating that for the time being central bankers are satisfied to remain on a steady tightening course despite signals that inflation is not dropping as they had wanted.

At its meeting on March 21–22, the Fed is projected to raise rates by 25 basis points, however, some analysts predict a 50 basis point increase if inflation and growth remain high.

The data also caused markets to raise the expected rate tops for the Bank of England and the European Central Bank.

the U.S.’s two-year Treasury yield increased by 0.4 basis points to 4.809%, slightly missing the three-month high of 4.840% it reached on Friday. Treasury yield normally moves in lockstep with interest rate predictions.

As a gauge of economic expectations, the Treasury yield curve, which measures the difference between the yields on two- and 10-year Treasury notes, was at -87.7 basis points.

The euro recovered from the seven-week low it reached on Friday, rising 0.08% to $1.0554. The price of sterling recently traded at $1.1959, up 0.13% today.

After falling to more than two-month lows of 136.58 earlier in the session, the Japanese yen gained 0.15% to 136.26 against the dollar.

The Australian dollar increased by 0.12% to $0.673, while the New Zealand dollar increased by 0.13% to $0.617.

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