Dollar Down, Investors Await Further Inflation Data

The dollar was down on Friday morning in Asia but remained near multi-month highs as weary investors await further inflation data to close the week. The pound, meanwhile, nursed a modest loss after the Bank of England (BOE) shied away from hiking interest rates in its latest policy decision.

The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched down 0.03% to 91.767 by 12:13 AM ET (4:13 AM GMT).

The USD/JPY pair inched down 0.01% to 110.84, with the yen just below a 15-month low against the dollar. Data released earlier in the day said that the Tokyo core consumer price index (CPI) grew 0% year-on-year in June, while the CPI Tokyo Ex Food and Energy index contracted 0.1% month-on-month in June, which was smaller than May’s 0.4% contraction.

The AUD/USD pair edged up 0.14% to 0.7592 and the NZD/USD pair was up 0.22% to 0.7074. Trade data from New Zealand said that exports and imports stood at a better-than-expected NZD5.87 billion and NZD5.4 billion respectively in May. The trade balance was at –NZD60 million year-on-year while the month-on-month figure was NZD469 million.

The USD/CNY pair inched down 0.10% to 6.4639 and the GBP/USD pair inched up 0.03% to 1.3926.

Investors are still digesting the U.S. Federal Reserve’s surprise hawkish turn as it handed down its policy decision during the previous week, although comments from Fed Chairman and other officials throughout the past week calmed market nerves about an imminent interest rate hike.

The Bank of England’s decision hinted that the central bank was in no hurry to hike interest rates, with officials warning against “premature tightening” as the decision was handed down on Thursday.

“Some in the market obviously positioned for a less dovish or a hawkish tilt,” National Australia Bank (OTC:NABZY) director of economics and markets Tapas Strickland told Reuters.

Meanwhile, the Banco de México hiked its interest rates for the first time since late 2018, with the Mexican peso climbing to a two-week high after the surprise move.

Investors also digested U.S. economic data released on Thursday, which said that the GDP rose 6.4% quarter-on-quarter in the first quarter of 2021. However, core durable goods orders rose a smaller-than-expected 0.3% month-on-month in May.

On the employment side, 411,000 initial jobless claims were filed over the past week, higher than the 380,000 claims in forecasts prepared by Investing.com abut lower than the 418,000 claims submitted during the previous week.

Further U.S. data on personal spending and the University of Michigan consumer sentiment is due later in the day.

“The dollar can jump if inflation surprises to the upside… upside inflation surprises have been the trend in the U.S. recently,” Commonwealth Bank of Australia (OTC:CMWAY) head of international economics Joe Capurso told Reuters.