2023.05.2617:00:00UTC+00U.S. Dollar Rebounds As Core PCE Inflation Picks Up

The U.S. dollar rebounded against its major counterparts in the New York session on Friday, as stronger-than-expected core personal consumption expenditure price index for April strengthened expectations for another interest rate hike from the Federal Reserve.

Data from the Commerce Department showed that the core PCE price index climbed 4.7 percent year-over-year in April from 4.6 percent in March. Economist had expected the pace of growth to be unchanged.

The report said the annual rate of consumer price growth accelerated to 4.4 percent in April after slowing to 4.2 percent in March.

The faster consumer price growth came as a surprise to economists, who had expected the pace of growth to slow to 3.9 percent.

On a monthly basis, consumer prices rose by 0.4 percent in April after inching up by 0.1 percent in March, while core consumer prices also increased by 0.4 percent in April after rising by 0.3 percent in March.

The Commerce Department said personal income climbed by 0.4 percent in April after rising by 0.3 percent in March. The growth matched expectations.

The report also showed consumer spending advanced by 0.8 percent in April following a revised 0.1 percent uptick in March.

Economists had expected spending to rise by 0.4 percent compared to the unchanged reading originally reported for the previous month.

The greenback appreciated to more than a 2-month high of 1.0702 against the euro and a 1-1/2-month high of 0.9074 against the franc, off its early 2-day lows of 1.0758 and 0.9018, respectively. The greenback is seen finding resistance around 1.05 against the euro and 0.92 against the franc.

The greenback advanced to 140.70 against the yen, its strongest level in more than six months. Against the kiwi, it touched a 6-1/2-month high of 0.6033. The currency is likely to face resistance around 145.00 against the yen and 0.585 against the kiwi.

The greenback recovered to 1.2321 against the pound, from an early 2-day low of 1.2395. If the greenback strengthens further, it is likely to test resistance around the 1.21 region.

The greenback rebounded to 0.6544 against the aussie and 1.3646 against the loonie after the data. This may be compared to its previous 6-1/2-month high of 0.6490 and a 4-week high of 1.3654, respectively. The currency is poised to find resistance around 0.63 against the aussie and 1.38 against the loonie.