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Dollar Firms As Strong U.S. Inflation Data Boosts Aggressive Tightening Hopes

dollar 080219 10jun22 lt

The U.S. dollar spiked higher against its major counterparts in the European session on Friday, as the nations's consumer inflation accelerated more than expected in May, intensifying the prospects of aggressive policy tightening by the Federal Reserve beyond July.

Data from the Labor Department showed that the consumer price index jumped by 1.0 percent in May after rising by 0.3 percent in April. Economists had expected consumer prices to increase by 0.7 percent.

Excluding food and energy prices, core consumer prices climbed by 0.6 percent in May, matching the growth seen in the previous month. Core prices were expected to rise by 0.5 percent.

The report also showed the annual rate of consumer price growth accelerated to 8.6 percent in May from 8.3 percent in April, showing the biggest surge since December 1981. The annual growth was expected to be unchanged.

Meanwhile, the annual rate of core consumer price growth slowed to 6.0 percent in May from 6.2 percent in April. Economists had expected the pace of growth to decelerate to 5.9 percent.

U.S. treasury yields rose following the report, with the benchmark 10-year yield touching 3.10 percent. Yields move inversely to bond prices.

The Fed meeting is due next week, with economists expecting a rate hike of 50 basis points amid soaring inflation.

The currency fell against its major rivals in the Asian session, except the franc.

The greenback rose to its highest level since May 19 against the euro, at 1.0521. The pair was worth 1.0615 when it closed deals on Thursday. The greenback may face resistance around the 1.03 region, if it gains again.

The greenback rebounded modestly against the yen, with the pair trading at 134.39. The pair had closed Thursday's deals at 134.32. Further rally in the currency may challenge resistance around the 136.00 region.

The greenback jumped to more than a 3-week high of 0.9893 against the franc from yesterday's close of 0.9800. Next near term resistance for the greenback is found around the 1.02 level.

The greenback was up against the pound, at a fresh 3-week high of 1.2343. The pound-greenback pair had ended yesterday's trading session at 1.2490. Should the currency rallies again, 1.21 is possibly seen as its next resistance level.

The greenback appreciated to a fresh 2-week high of 1.2813 against the loonie from Thursday's close of 1.2697. The greenback may test resistance near the 1.31 level.

The greenback moved up to more than a 2-week high of 0.7037 against the aussie and a fresh 3-week high of 0.6351 against the kiwi, from Thursday's closing values of 0.7097 and 0.6383, respectively. The greenback is likely to challenge resistance around 0.68 against the aussie and 0.60 against the kiwi.

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