Forex News: Peace Deal Hopes, Soft Core CPI Dent Dollar

Peace Deal Hopes, Soft Core CPI Dent Dollar

(RTTNews) - Better-than-expected core CPI data from the U.S as well as renewed hopes of a peace deal between the U.S. and Iran abetted the dollar's retreat during the week ended June 12. Softer-than-expected core CPI readings as well as the decline in crude oil prices contributed to markets tempering expectations of a rate hike by the Federal Reserve.

During week ended June 12, the U.S. dollar inter alia declined against the euro, the British pound, the Japanese yen as well as the Swedish krona. It however rallied against the Australian dollar, the Canadian dollar as well as the Swiss franc. As a result, the Dollar Index which measures the Dollar's strength against a basket of 6 currencies dropped more than a quarter percent on a weekly basis. Here is a quick recap of the dollar's trajectory during the week ended June 12 that also witnessed progress in diplomatic efforts to end the Middle East war.

Fears of a hawkish monetary policy action by the Federal Reserve that had boosted the greenback ever since the start of the Middle East war faded after data released by the U.S. Bureau of Labor Statistics on Wednesday showed annual headline inflation, monthly headline inflation as well as annual core inflation matching market expectations. The month-on-month core inflation on the other hand, declined more than what the markets had expected, weakening the U.S. dollar's strength founded on Fed rate hike fears.

Headline inflation reading on a year-on-year basis rose to 4.2 percent in May from 3.8 percent in April. On a month-on-month basis, headline inflation decreased to 0.5 percent from 0.6 percent in the previous month. The year-on-year core inflation level which excludes the volatile food and fuel component increased to 2.9 percent from 2.8 percent in the previous month. On a month-on-month basis, the core inflation declined to 0.2 percent from 0.4 percent in April, surpassing expectations of a decline to 0.3 percent.

Data released by the U.S. Bureau of Labor Statistics on Thursday showed producer price inflation increasing 1.1 percent in April, while markets had anticipated an increase of 0.7 percent. The spike is mainly attributable to the increase in gasoline prices.

During the past week, the Dollar Index traded between the weekly high of 100.31 and the weekly low of 99.59, both recorded on Thursday. The index eventually closed the week's trading at 99.75, implying a decline of 0.32 percent from the level of 100.07 on June 5.

Boosted by the dollar's weakness as the well as the widely expected interest rate hike by the European Central Bank, the EUR/USD pair rallied 0.42 percent during the week ended June 12. From the weekly low of 1.1500 touched on Monday, the pair climbed to a high of 1.1591 on Thursday. The pair eventually closed the week at 1.1569, versus 1.1521 a week earlier.

The British pound rallied 0.49 percent against the greenback during the week ended June 12. The GBP/USD pair which had closed at 1.3341 on June 5 closed trading for the week ended June 12 at 1.3407. The weekly trading range was wider, between a low of 1.3305 recorded on Monday and a high of 1.3435 recorded on Thursday. Data released on Friday showed GDP in the UK contracting as expected, by 0.1 percent month-on-month in April versus a 0.3 percent expansion in March.

The Australian Dollar edged down 0.01 percent against the U.S. Dollar during the past week. The AUD/USD pair closed the week ended June 12 at 0.7046 versus 0.7047 recorded a week earlier. During the week, the pair oscillated between a high of 0.7079 recorded on Monday and the low of 0.6979 recorded on Thursday.

The U.S. dollar slipped against the Japanese yen also during the week ended June 12 amidst strong expectations of a rate hike by the Bank of Japan. The USD/JPY pair closed the week at 160.23 versus 160.32 a week earlier, registering a mild decline of 0.06 percent. During the week, the pair oscillated between the high of 160.63 and the low of 159.64, both recorded on Thursday.

With global markets cheering the peace deal between the U.S. and Iran, the dollar has slipped further on Monday. However, anxiety ahead of the Fed's interest decision scheduled for Wednesday limited the greenback's retreat. The six-currency Dollar Index touched a low of 99.38 on Monday and is currently trading at 99.50, implying an overnight decline of 0.24 percent from Friday's closing level of 99.75.

The EUR/USD pair is currently trading 0.35 percent higher at 1.1609 versus 1.1569 on Friday.

The GBP/USD pair is currently trading near 1.3432 versus 1.3407 on Friday, implying a gain of 0.19 percent. Amidst market expectations of a spike in inflation in May, and a steady unemployment report for April, markets expect the Bank of England to maintain status quo on rates at its meeting scheduled for Thursday.

The AUD/USD pair is currently trading 0.38 percent higher at 0.7073 versus 0.7046 on Friday. The Reserve Bank of Australia is widely expected to maintain rates steady at its meeting on Tuesday.

Ahead of Bank of Japan's interest rate decision on Tuesday, the USD/JPY pair is now 0.06 percent lower at 160.14 as compared with the level of 160.23 recorded at the end of the previous week.

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