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A popular gauge of the U.S. dollar’s strength edged lower early Friday, putting it on track to mark a third straight loss after a brisk run-up and its first weekly decline after three consecutive weekly gains.
More broadly, the buck was retreating against most of its major counterparts, adding to Thursday’s downbeat sentiment on disappointment over a key read of inflation that came in cooler than expected, suggesting that the Federal Reserve may not need to raise interest rates faster than Wall Street is expecting this year, a slightly bearish factor for greenback.
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What are currencies doing?
The ICE U.S. Dollar Index which measures the buck against a half-dozen counterparts, was down 0.2% at 92.506, threatening to push the gauge to its first weekly loss in about a month. The gauge is on track for a weekly decline of about 0.1%, its first weekly loss since mid-April.
Meanwhile, the broader WSJ Dollar Index which tracks the U.S. unit’s strength against a broader currency basket, slipped 0.1% to 86.15, also poised for a weekly decline of less than 0.1%.
The euro changed hands at $1.1948, up from $1.1917 in the previous session.
The British pound also strengthened, buying $1.3567, slipping from $1.3519 late Thursday in New York.
The greenback also weakened slightly against the Japanese yen buying ¥109.32 versus ¥109.40 Wednesday.
The Canadian dollar gave up previous gains following weaker-than-expected employment data, and the greenback fetched C$1.2786, compared with C$1.2769 late Thursday.
In emerging markets, the Turkish lira had a tough day and sold off against the dollar driven by its recurring themes of reliance on external, dollar-denominated debt, poor economic fundamentals and its impending snap election scheduled for June. One dollar last bought 4.3070, up 1.8%, according to FactSet data.
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What’s driving the market?
Currency traders will await further economic reports later Friday following Thursday’s reading on consumer prices, that highlighted that inflation, once threatening to jump higher, is climbing at only a moderated pace. Inflation grew at 0.2% last month, compared with expectations from economists surveyed by MarketWatch of 0.3%. Core inflation, which strips out volatile food and energy prices, came in at 0.1%, compared with expectations for a 0.2% rise.
The slower pace of inflation hints that the Federal Reserve won’t need to step up the speed at which it is normalizing its monetary policy. The central bank is expected to raise interest rates at least three times this year, with one hike having gotten completed in March.
Meanwhile, the greenback has been under pressure as crude oil prices surged to the highest levels since late 2014, delivering a healthy jolt to countries that are major exporters of the commodity. Notably, the U.S.’s northern neighbor, Canada, a major crude-oil producer has enjoyed the benefits of resurgent oil futures.
Oil has bounded higher partly on the back of President Donald Trump’s decision to exit from the multilateral Iran nuclear pact, which is expected to result in some disruptions to Middle Eastern oil production, bullish for crude.
Elsewhere, European Central Bank President Mario Draghi said the eurozone needed a new fiscal instrument to fight future financial crises and maintain convergence. The eurozone includes economies as unequal as Spain, the bonds of which still trade at a higher risk premium, and Germany, the growth engine of Europe.
What are strategists saying?
“Broadly speaking our indicators for the dollar remain broadly positive but some commodity related currencies have broken away from this; especially those with links to oil,” wrote Steve Barrow, head of G-10 strategy at Standard Bank, in a Friday research note.
What else is in focus?
The April import price index rose 0.3%, less than the 0.5% increase expected by economists. Over the past 12 months the index was steady at 3.3%
St. Louis Fed President James Bullard said the yield curve inversion worried him and that it could happen as soon as September. He added that the central bank had acted pre-emptively in its monetary policy and was keeping inflation low through that.
The University of Michigan’s consumer-sentiment index for May read 98.8, marginally exceeding consensus expectations 98.7.