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Dollar falters on disappointing inflation and jobs data

8/11/2017, 10:29:09 AMMarket Analysis
Dollar falters on disappointing inflation and jobs data

 The dollar was roughly unchanged against a basket of global currencies on Thursday, as the flight to safety trade continued in the wake of rising geopolitical tensions between the U.S. and North Korea while weak inflation data added to downside momentum.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell by 0.03% to 93.38.

The dollar struggled for direction as data showed the slowdown in inflation continued unabated while initial jobless claims data undershot expectations.

The producer-price index fell 0.1% in July, the Labor Department said Thursday, the first drop since last August. The core rate, which excludes volatile categories of food, energy and trade, was flat in the month.

Meanwhile, initial claims for state unemployment benefits increased 3,000 to a seasonally adjusted 244,000 for the week ended August 5, the Labor Department said on Thursday.

Economists had forecast claims falling to 240,000.

The weaker-than-expected pair of economic reports came a few hours ahead of a speech by New York Fed President William Dudley suggesting the central bank was on track to raise interest rates once more and begin shedding some bond holdings this year.

"Our outlook anticipates a continued moderate growth trend, with some further strengthening in the labor market and an increase in inflation over the medium term toward our objective of 2 percent," Dudley said in prepared remarks that did not specifically mention monetary policy.

Also weighing on the greenback was continued geopolitical uncertainty, after North Korea ignored President Trump’s earlier warning that further threats will be met with ‘fire and fury’, prompting investors to flee risky assets in search of safe havens like gold and the yen.

USD/JPY fell 0.70% to Y109.31.

GBP/USD fell by 0.24% to $1.2973, after manufacturing activity in June remained subdued while industrial production showed a slight uptick from the prior month, beating economists’ forecasts.

EUR/USD lost 0.04% to $1.1753 while EUR/GBP rose by 0.18% to £0.9058.

USD/CAD rose 0.16% to C$1.2721.