The dollar is heading for its largest weekly decline against the euro in two-and-a-half months, driven by signs of cooling inflation and a softening U.S. economy that raise the possibility of interest rate cuts. This week, the euro has risen 0.9% against the dollar, surpassing resistance around $1.0855 and reaching as high as $1.0895 following slower U.S. inflation.
The euro last traded at $1.0861. Although April's annual U.S. inflation numbers met expectations, they were lower than the previous month, boosting confidence that the Federal Reserve could cut interest rates in September and December, which has fueled rallies in stocks and bonds while putting pressure on the dollar.
Additionally, U.S. retail sales remained flat in April and fell short of expectations, while manufacturing output unexpectedly declined. Westpac strategist Imre Speizer noted that alongside inflation, several activity indicators have been cooling off, contributing to the dollar's decline.
Despite markets pricing in European rate cuts beginning in June, recent data has shown some positive surprises. Germany's economy grew more than anticipated last quarter, and investor morale has reached a two-year high.
The Australian and New Zealand dollars have each gained over 1% against the U.S. dollar this week, with the New Zealand dollar up 1.7%, poised for its best week of the year. The Australian dollar, at $0.6675, dropped from a four-month high due to an unexpected rise in unemployment figures, which dampened the likelihood of another rate hike. The New Zealand dollar was steady at $0.6120, with traders anticipating next week's central bank meeting, where the official cash rate is expected to remain at 5.5%.
Sterling has increased by 1.1% this week to $1.2664. The Japanese yen has remained broadly steady at 155.48.
In the cryptocurrency market, Bitcoin is up 6.6% this week to $65,343.
Later in the session, Chinese retail sales and industrial output data will be released, followed by the publication of final European CPI numbers.
Paraphrasing text from "Reuters" all rights reserved by the original author.
