After rallying early in the week, the U.S. dollar was on the defensive yesterday and continued to lose ground overnight.
Overall, the Bloomberg Spot Dollar Index fell 0.2% to its worse level in a week. Nevertheless, the greenback remains near multi-month bests against most of its counterparts.
This morning’s economic docket may give the U.S. dollar a chance to claw back some of its losses. U.S. consumer spending rose in April by the most in five months. Spending rose 0.6% in April, beating expectations of a 0.4% advance. March’s reading was also upwardly revised. Personal income held flat at 0.3%. A separate report showed that inflation held at 2.0% year over year, right in line with the Fed’s target. Later pending home sales will cross the wires.
Attention will then turn to tomorrow’s release of Non-Farm payrolls. Economists expect that the economy added 190K jobs in May, up from 164K in April.
The Euro remained in recovery mode overnight, strengthening to a one-week high against the U.S. dollar. While the Italian political crisis remains an overall driver for Euro weakness, the common currency saw some reprieve as Italian bonds rallied overnight.
The Euro also found support as a report showed that Euro-area inflation hit its fastest pace in more than a year. Inflation came in at 1.9% in May, up from 1.2% in April and above the median estimate of 1.6%. The 1.9% reading essentially matches the European Central Bank’s target of 2.0%.
The British pound also rebounded modestly against the U.S. dollar overnight on possible profit-taking. The sterling is now at a one-week high versus the greenback.
British economic data was mixed today. House prices fell 0.2% month over month, showing the housing market remains soft. However, the GfK consumer confidence reading strengthened modestly to -7.