Dollar Extends Drop as Inflation Unexpectedly Cools
A dollar gauge extended its drop after US inflation unexpectedly cooled ahead of tariffs, which are expected to spark price growth. Haven currencies like the Swiss franc and the yen were among best performers in the Group of 10.
The Bloomberg Dollar Spot Index fell 1.5%
The gauge fell to the weakest since October and had the worst day since Nov. 2022 on the closing basis
The consumer price index, excluding often volatile food and energy costs, increased 0.1% from February, the least in nine months, according to Bureau of Labor Statistics data out Thursday
The data “will help give the Fed cover to cut when the time is right,” said Win Thin, global head of markets strategy at Brown Brothers Harriman & Co. in New York
Tariff-related price increases could show up in inflation data starting in June as companies first go through their inventories, according to Richmond Fed President Tom Barkin
“The markets are still focused on USD and diversification away from US assets,” wrote Bob Savage, head of markets strategy and insights at BNY in New York. “This will take time but rallies are going to be sold not chased”
“USD weakness is going to add to inflation concerns,” he said. “For investors, this is a hard-to-impossible environment, so the predominant attitude is wait and see and to hold cash – all of which makes for an uncertain relief rally”
US weekly jobless claims rose 4K to 223K, matching estimates
USD/CHF dropped 3.7% to 0.8251
USD/JPY declined 2.1% to 144.69
“This is a flow-driven move as assets continue to rotate out of the US and into places like Europe and Japan and elsewhere,” wrote Jefferies global head of FX Brad Bechtel. “Investor confidence in US markets is rattled and not likely to be repaired anytime soon”
EUR/USD rose 2.3% to 1.1202
“The EU’s limited response appeared to be interpreted as a display of goodwill by US officials, likely providing support to the EUR,” said Luis Hurtado, a strategist at CIBC in Toronto
GBP/USD rose 1.1% to 1.2966
Source : Bloomberg
