Dollar clings to gains after US data; traders eye upcoming Fed meetings

THE dollar clung to modest gains against the euro on Friday (Jan 27) after data showed falling US consumer spending and cooling inflation, and as investors awaited a slew of upcoming central bank meetings.

Consumer spending, which accounts for more than two-thirds of US economic activity, dropped 0.2 per cent last month, the Commerce Department said on Friday.

Data for November was revised lower to show spending slipping 0.1 per cent instead of gaining 0.1 per cent as previously reported. Economists polled by Reuters had forecast consumer spending dipping 0.1 per cent.

The Commerce Department reported the Federal Reserve’s preferred gauge for inflation, the personal consumption expenditures (PCE) price index, rose 0.1 per cent last month after a similar rise in November.

“US PCE landed pretty much as expected and has very little impact on the Federal Reserve’s upcoming decision,” said Simon Harvey, the head of FX Analysis at Monex Europe.

The euro was 0.17 per cent lower at US$1.08725, but not far from the nine-month high of US$1.09295 touched on Monday.

For the week, it was up about 0.2 per cent.

Against the yen, the dollar was 0.25 per cent lower at 129.89 yen as hot Tokyo inflation readings spurred bets that a hawkish pivot from the Bank of Japan could be in the offing.

Attention now turns to a slew of central bank policy decisions, with the Fed, European Central Bank and Bank of England (BOE) all due to make rate decisions this week as they judge what policy adjustments may be required in their battle with rampant inflation against a tough global economic backdrop.

SEE ALSO

US dollar ticks up ahead of central bank meetings

Sterling slipped 0.12 per cent to US$1.2397, amid investor worries that the British economy’s slowdown may prompt the BOE to end its tightening cycle soon, a move which might weaken the pound in the short term. REUTERS