Forex - Dollar Under Pressure on Inflation Jitters, GBP/USD Nears 2-Week High
Investing.com
Published Oct 13, 2017 12:51PM ET
Investing.com – The dollar fell against a basket of major currencies on Friday after inflation data undershot expectations threatening the outlook for a December rate increase.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell by 0.14% to 92.81.
The Labor Department said on Friday its Consumer Price Index rose 0.5% last month after advancing 0.4% in August. That missed economists forecast of a 0.6% rise.
The slowdown in inflation lowered expectations for a December rate hike amid recent comments from Fed officials urging the central bank to hold off additional rate increases until the trend of slowing inflation subsided.
Louis Fed President James Bullard warned on Thursday that the central bank should stop raising rates until the pace of inflation improves.
"If you are going to have an inflation target you should defend it. If you say you are going to hit the inflation target then you should try to hit it and maintain credibility," Bullard said in an interview with Reuters.
Some analysts, however, were quick to downplay the softer inflation data in the wake of recent hurricanes Harvey and Irma.
“What’s weighing on the dollar is the softer core inflation data,” said Viraj Patel, FX strategist at ING, adding that the headline data were expected to be distorted by the effect of the hurricanes that hit the U.S. in September.
Meanwhile, retail sales rose 1.6%, their biggest gain since 2015, the Commerce Department said on Friday. Economists had expected a 1.7% increase.
Also weighing on the dollar was a surge in the pound to a nearly two-week high following a slump in the previous session after Brexit negotiators declared talks between the UK and the European Union had reached a deadlock.
GBP/USD rose 0.29% to $1.3302.
EUR/USD gained 0.08% to $1.1840, while EUR/GBP lost 0.21% to £0.8901.
USD/CAD added on 0.32% to C$1.2519, while USD/JPY fell 0.34% to Y111.90.
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Written By: Investing.com
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