US Dollar Declines on Friday, Heads to End Week Flat

The US dollar extended yesterday’s decline today, heading to end the week flat versus most of its major rivals.

The dollar remained extremely soft following the Thursday’s worse-than-expected inflation data. Today’s reports were decent for the most part as both import and export prices were rising, while the consumer sentiment remained unchanged despite forecasts of a decline. The Survey of Consumer Sentiment by the University of Michigan provided interesting insights into consumer expectations:

What is likely to capture attention, however, are the small uptick in near term inflation expectations, the downward slippage in income expectations, and the expected stabilization of the national unemployment rate at decade lows.

It also discussed what that can mean to the interest rate outlook:

The data will thus provide some additional points for both sides in the debate about the timing and number of future interest rate hikes. Eight-in-ten consumers anticipated interest rate hikes during the year ahead.

The currency remained supported by the outlook for more rate hikes from the Federal Reserve this year. The CME FedWatch tool was showing a 100% chance of a hike in June, about 80% chance of additional hike in September, and about 50% of yet another hike in December.

EUR/USD advanced from 1.1914 to 1.1936 as of 18:33 GMT today, touching the daily high of 1.1967 earlier. GBP/USD was up from 1.3514 to 1.3539, though it retreated from the daily maximum of 1.3595. USD/JPY ticked down from 109.38 to 109.32.

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