# Dollar trims gains vs euro after U.S. inflation data
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-03-31
Category: TRADING
Category URL: https://financedigest.com/category/trading
Meta Title: Dollar trims gains after US data shows slower PCE growth in
Meta Description: The dollar lost ground to the euro as US consumption expenditure growth slowed in February, hinting at a dovish Fed monetary policy stance.
URL: https://financedigest.com/dollar-trims-gains-vs-euro-after-u-s-inflation-datahtml

![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2023-03-31t121034z1lynxmpej2u0jnrtroptp4global-credit-smes-1736814217430-compressed.jpg)

By Saqib Iqbal Ahmed

NEW YORK (Reuters) -The dollar pared gains against the euro on Friday after U.S. [data showed personal consumption expenditure growth](https://www.financedigest.com/bridge-the-gaps-in-big-data-and-cross-into-a-world-of-growth.html "Bridge the gaps in Big Data – and cross into a world of growth") slowed in February, supporting hopes of a softer monetary policy approach from the Federal Reserve.

U.S. consumer spending rose moderately in February, likely payback after surging the prior month, and while inflation showed signs of cooling it remained elevated, which could [see the Fed raising interest rates one more time this year](https://www.financedigest.com/10-year-david-goliath-crusade-finally-sees-justice-for-off-plan-spanish-property-buyers.html "10 year ‘David & Goliath’ crusade finally sees justice for off-plan Spanish property buyers").

Earlier in the session, [data showed euro zone inflation](https://www.financedigest.com/european-shares-rise-as-us-inflation-data-signals-end-of-rate-hike-cycle.html "European shares rise as US inflation data signals end of rate-hike cycle") dropped by the most on record in March, but core price pressures, which exclude food and energy, accelerated, maintaining pressure on the European Central Bank to keep raising rates.

The data has left markets positioned for more rate rises in the [euro zone](https://www.financedigest.com/euro-zone-consumers-more-optimistic-on-inflation-ecb-survey-shows.html "Euro zone consumers more optimistic on inflation, ECB survey shows") than in the United States

In terms of inflation, I think the [Fed is in a better position to the ECB,”](https://www.financedigest.com/stocks-euro-gain-amid-divergent-fed-ecb-rate-hike-outlooks.html "Stocks, euro gain amid divergent Fed, ECB rate hike outlooks") said Stuart Cole, head macro economist at Equiti Capital.

“Yes, inflationary pressures are above target, but you look at the U.S. and both [headline and core](https://www.financedigest.com/boes-mann-falling-headline-inflation-high-core-make-policy-difficult.html "BoE’s Mann: Falling headline inflation, high core, make policy difficult") are moving in the right direction, albeit painfully slowly. But in the [euro zone](https://www.financedigest.com/euro-zone-inflation-eases-in-feb-but-core-prices-pick-up.html "Euro zone inflation eases in Feb but core prices pick up") you have a divergence which makes policy-making much harder,” Cole said.

The euro was 0.06% [lower at $1.08975 after the data](https://www.financedigest.com/sterling-edges-lower-ahead-of-key-data.html "Sterling edges lower ahead of key data"). The common currency had slipped as much as 0.37% to a low of $1.08645 earlier in the session.

The Fed is seen as about as likely to [raise its benchmark overnight interest](https://www.financedigest.com/delivery-hero-ramps-up-interest-payments-to-raise-1-billion-euro-convertible-bond.html "Delivery Hero ramps up interest payments to raise 1 billion euro convertible bond") rate in May as not. But even if it does, it is expected to reverse course quickly and end the [year with rates lower](https://www.financedigest.com/spains-inflation-to-be-lower-this-year-than-in-2022-minister.html "Spain’s inflation to be lower this year than in 2022 -minister") than they began, according to futures contracts tied to the U.S. central [bank’s policy rate](https://www.financedigest.com/bank-of-englands-mann-doubles-down-on-backing-for-rate-hikes.html "Bank of England’s Mann doubles down on backing for rate hikes").

My [gut feeling](https://www.financedigest.com/decision-making-in-times-of-crisis-should-they-be-based-on-gut-feeling-or-data.html "Decision-making in times of crisis: should they be based on gut feeling or data?") is that the Fed will go for another 25 basis points in May, and that will be it … but the [ECB I can see hiking](https://www.financedigest.com/ecb-weighs-bigger-rate-hike-with-safety-net-for-indebted-countries.html "ECB weighs bigger rate hike with safety net for indebted countries") aggressively still into the summer,” Equiti Capital’s Cole said.

You can potentially see that being positive for EUR/USD from the [interest rate](https://www.financedigest.com/ecbs-centeno-says-interest-rate-close-to-peaking-if-no-new-shocks.html "ECB’s Centeno says interest rate close to peaking if no new shocks") perspective,” he said.

Next week, [central bank meetings](https://www.financedigest.com/dollar-skulks-at-eight-month-low-central-bank-meetings-in-focus.html "Dollar skulks at eight-month low, central bank meetings in focus") loom in Australia and New Zealand. Markets have [priced in a pause for Australia and a step down in pace to a 25 basis point increase](https://www.financedigest.com/taylor-wimpey-espana-remain-cautiously-optimistic-as-average-selling-price-increases-by-20-4.html "Taylor Wimpey España ‘remain cautiously optimistic’ as average selling price increases by 20.4%") for New Zealand.

Both currencies were little changed on the day after data showed China’s manufacturing activity expanded at a slower pace in March, raising doubts about the strength of a post-COVID factory recovery amid weaker global demand and a [property market](https://www.financedigest.com/2017-spanish-property-market-gems-kyero-com-gazes-into-the-crystal-ball.html "2017 Spanish property market gems – Kyero.com gazes into the crystal ball") downturn.

Sterling was about flat on Friday at $1.2393, but on pace to finish the week up 1.3% against the greenback after [data showed Britain’s economy avoided](https://www.financedigest.com/the-race-to-avoid-data-dinosaur-extinction.html "THE RACE TO AVOID DATA DINOSAUR EXTINCTION") a recession in the final months of 2022.

In cryptocurrencies, bitcoin was 1.3% higher at $28,410. The digital currency came under pressure recently as investors worried over cryptocurrency exchange Binance and Chief Executive Changpeng Zhou being sued by the [Commodity Futures Trading](https://www.financedigest.com/a-brits-guide-to-understanding-commodity-trading.html "A Brit’s Guide to Understanding Commodity Trading") Commission(CFTC) over regulatory violations.

(Reporting by Saqib Iqbal Ahmed; Editing by Sharon Singleton and Jonathan Oatis)


---
This blog is powered by Superblog. Visit https://superblog.ai to know more.
---