Dollar slips against euro but maintains weekly gains
The U.S. dollar slipped against the euro on Friday but held on to weekly gains, as investors weighed expected Federal Reserve policy amid signs that tariffs may be starting to increase some inflation pressures and as U.S. President Donald Trumpcontinued to criticise Chair Jerome Powell.
Data on Tuesday showed that consumer prices rose in June, though the increase was seen as moderate. Wednesday’s producer price inflation report showed that prices were steady last month.
Powell has said he expects inflation to rise this summer as a result of Trump’s tariff policies. His comments have pushed out expectations of when the U.S. central bank is likely to cut interest rates.
But the labor market is showing signs of weakness even as headline job gains and the unemployment rate remain relatively solid.
“We're waiting on the tariffs to become real and not just a negotiating ploy and waiting on the labor market to reveal itself,” said Lou Brien, strategist at DRW Trading in Chicago.
“Layoffs are at a lower level than they were pre-pandemic, but the hiring is terrible. And if, all of a sudden, the layoffs come up, we're going to get a significant increase in the unemployment rate very quickly,” Brien said.
Fed funds futures traders are pricing in 46 basis points of cuts by year-end, implying that two 25 basis point cuts are seen as most likely, with the first coming in September.
The dollar index was roughly flat on the day at 98.49, and is on track for a 0.65% weekly gain.
The euro was last up 0.22% at $1.1621 but is headed for a weekly drop of 0.59%.
The euro pared gains after the Financial Times reported that Trump is pushing for a minimum tariff of 15% to 20% in any deal with the European Union.
Sterling was flat at $1.3411 and is heading for a weekly decline of 0.64%.
The Japanese yen was slightly lower against the greenback heading into Sunday's upper house election, in which Japan's ruling party looks vulnerable.
The dollar gained 0.1% to 148.75 yen and is on track for a weekly gain of 0.93%.
Source: Reuters
