U.S. consumer spending rose moderately in February, likely
payback after surging the prior month, and while inflation
showed signs of cooling it remained elevated, which could see
the Fed raising interest rates one more time this year.
Earlier in the session, data showed euro zone inflation
dropped by the most on record in March, but core price
pressures, which exclude food and energy, accelerated,
maintaining pressure on the European Central Bank to keep
raising rates.
The data has left markets positioned for more rate rises in
the euro zone than in the United States
"In terms of inflation, I think the Fed is in a better
position to the ECB," said Stuart Cole, head macro economist at
Equiti Capital.
"Yes, inflationary pressures are above target, but you look
at the U.S. and both headline and core are moving in the right
direction, albeit painfully slowly. But in the euro zone you
have a divergence which makes policy-making much harder," Cole
said.
The euro was 0.06% lower at $1.08975 after the
data. The common currency had slipped as much as 0.37% to a low
of $1.08645 earlier in the session.
The Fed is seen as about as likely to raise its benchmark
overnight interest rate in May as not. But even if it does, it
is expected to reverse course quickly and end the year with
rates lower than they began, according to futures contracts tied
to the U.S. central bank's policy rate.
"My gut feeling is that the Fed will go for another 25 basis
points in May, and that will be it ... but the ECB I can see
hiking aggressively still into the summer," Equiti Capital's
Cole said.
"You can potentially see that being positive for EUR/USD
from the interest rate perspective," he said.
Next week, central bank meetings loom in Australia and New
Zealand. Markets have priced in a pause for Australia and a step
down in pace to a 25 basis point increase for New Zealand. Both currencies were little changed on the day after data
showed China's manufacturing activity expanded at a slower pace
in March, raising doubts about the strength of a post-COVID
factory recovery amid weaker global demand and a property market
downturn.
Sterling was about flat on Friday at $1.2393, but
on pace to finish the week up 1.3% against the greenback after
data showed Britain's economy avoided a recession in the final
months of 2022.
In cryptocurrencies, bitcoin was 1.3% higher at
$28,410. The digital currency came under pressure recently as
investors worried over cryptocurrency exchange Binance and Chief
Executive Changpeng Zhou being sued by the Commodity Futures
Trading Commission(CFTC) over regulatory violations.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
World FX rates ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Saqib Iqbal Ahmed; Editing by Sharon Singleton
and Jonathan Oatis)
(Updates prices and market activity; adds comments)
By Saqib Iqbal Ahmed
NEW YORK, March 31 (Reuters) - The dollar pared gains
against the euro on Friday after U.S. data showed personal
consumption expenditure growth slowed in February, supporting
hopes of a softer monetary policy approach from the Federal
Reserve.
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