SINGAPORE, May 17 ― The dollar headed for its largest weekly fall versus the euro in two-and-a-half months today as signs of cooling inflation and a softening US economy raised the prospect of rate cuts.
The euro is up 0.9 per cent on the dollar this week, has broken above resistance around US$1.0855 and traded as high as US$1.0895 (RM5.10) in the wake of US inflation posting a slowdown.
It was last at US$1.0861. April's annual US inflation numbers met expectations but, since they were lower than the month before, they encouraged confidence that the Federal Reserve can cut interest rates in September and December ― driving rallies in stocks and bonds and pressure on the dollar.
US retail sales were also flat in April and softer-than-expected, and manufacturing output unexpectedly fell.
“(Besides inflation) a lot of activity data has been cooling off,” said Westpac strategist Imre Speizer, contributing to selling of the dollar.
At the same time, even though markets price European rate cuts beginning in June, recent data has shown some upside surprises. Germany's economy grew more than expected last quarter and investor morale is at a two-year high.
The Australian and New Zealand dollars are each up more than 1 per cent on the US dollar this week, with the kiwi up 1.7 per cent and eyeing its best week of the year.
At US$0.6675, the Aussie was knocked from a four-month high as a surprise rise in unemployment figures seemed to curtail any risk of another rate hike.
The New Zealand dollar was last steady at US$0.6120 with traders looking ahead to next week's central bank meeting, where the official cash rate is expected to stay at 5.5 per cent.
Sterling is up 1.1 per cent this week to US$1.2664. The Japanese yen has been broadly steady at 155.48.
In cryptocurrency markets bitcoin is up 6.6 per cent this week to US$65,343.
Chinese retail sales and industrial output data is due later in the session, and later today final European CPI numbers are published. ― Reuters
