USD

The dollar traded close to seven week highs on Friday as the latest data showed US inflation remained persistent, reinforcing expectations US interest rates could remain higher for longer.

Fuelling Friday’s rally in the dollar was the release of personal consumption expenditure (PCE) price index which measures the average amount of money consumers are spending in a month. The data showed, personal spending had grown 0.6% month-on-month, up from 0.2% in December. The core readings also showed a modest improvement. Added to this, personal spending which accounts to two thirds of the US economy also showed an increase at 1.8%, an improvement from December which showed a contraction of 0.1%.

Friday’s data rounds off a string of positive data releases in the US for February which indicate the US economy remaining resilient despite the increase in interest rates. The data will remain a concern for the Federal Reserve who seemingly have their work cut out to bring inflation back to its 2% target.

Many market participants had forecasted a dovish pivot from the Fed but the recent data suggests these expectations are premature. In the more likely scenario, the Federal Reserve will take interest rates higher for longer which will provide the US currency with a strong level of support for now.

Key announcements

13:30 – USD – Durable Goods Order (Jan) -4% previous 5.6%/font>

13:30 – USD – Nondefense Capital Goods orders ex Aircraft (Jan)