During the week ending May 31, PCE-based inflation data from the U.S. aligned largely with expectations, causing a minor decline in the six-currency Dollar Index. The U.S. Dollar strengthened against the euro, the British pound, and the Japanese yen but depreciated against the Australian Dollar.
In the week of May 27-31, the Dollar Index edged down by 0.05 percent, closing at 104.67 on May 31, compared to 104.72 a week earlier. The Index saw movement from a low of 104.33 on Tuesday to a high of 105.18 on Thursday.
Thursday’s data revealed that the second estimate of U.S. first-quarter GDP growth was adjusted to 1.3 percent, down from the initial estimate of 1.6 percent. Additionally, initial jobless claims for the week ending May 25 increased to 219,000 from the previous week’s 216,000, against a market expectation of 218,000.
Friday’s data from the U.S. Bureau of Economic Analysis showed the year-on-year PCE Price Index stabilizing at 2.7 percent, as anticipated. The core PCE Price Index remained at 2.8 percent. Month-on-month, the PCE Price Index stayed steady at 0.3 percent; however, the core measure edged down to 0.2 percent, deviating slightly from the expected 0.3 percent.
Despite a mild cooling in inflation, the U.S. Dollar's losses were limited. The inflation figures remained above the Federal Reserve's 2 percent target, fostering concerns that the Fed might maintain high interest rates.
The EUR/USD pair fell 0.04 percent during the week ending May 31, amidst anticipation surrounding the European Central Bank’s interest rate decision set for Thursday. The ECB is widely expected to announce rate cuts at its June meeting. The EUR/USD pair declined slightly from 1.0845 on May 24 to 1.0841 on May 31, with a trading range between 1.0890 and 1.0788 for the week. Similarly, the GBP/USD pair experienced a slight bearish trend, closing at 1.2739 on May 31, down from 1.2740 a week earlier. The pair's high for the week was 1.2802, recorded on Tuesday, while the low was 1.2680 on Thursday.
Conversely, the AUD/USD pair rallied by 0.38 percent over the week, closing at 0.6652 from 0.6627 the prior week. Data revealed an unanticipated increase in consumer price inflation, with April's CPI rising to 3.6 percent from 3.5 percent, contrary to expectations of a decrease to 3.4 percent. Retail sales data showed a less-than-expected rebound. The pair's trading range spanned from a high of 0.6680 on Tuesday to a low of 0.6589 on Thursday.
Despite significant intervention by the Japanese government, the yen continued to weaken against the greenback, reflecting the robustness of the U.S. economy. The USD/JPY pair ended the week 0.20 percent higher at 157.31, up from 156.99 a week earlier. It traded between 157.79 on Wednesday and 156.38 on Thursday.
As a data-intensive U.S. week commenced, featuring updates on Manufacturing PMI, job openings, Services PMI, and non-farm payrolls, the Dollar Index dropped to 104.53. Anticipation of the ECB's interest rate decision on Thursday pushed the EUR/USD pair to 1.0873. The GBP/USD pair rose to 1.2773, while the AUD/USD pair firmed to 0.6686, and the USD/JPY pair weakened to 156.21.
