Dollar falls ahead of U.S. inflation and retail sales data

by Jonathan Adams

The dollar has bounced back this year as U.S. Treasury yields rise on expectations of faster economic growth and higher inflation

The dollar slipped slightly on Monday as traders awaited highly anticipated U.S. inflation and retail sales data in coming days, and as the Treasury Department saw strong demand for new sales of three-year and 10-year notes.

The dollar has bounced back this year as U.S. Treasury yields rise on expectations of faster economic growth and higher inflation.

U.S. consumer price data for March due on Tuesday is a major economic focus. Investors are betting that price pressures will rise due to increased fiscal and monetary stimulus and as businesses reopen from pandemic related closures.

Comparisons with last year are also likely to be strong, due to a drop in inflation a year ago when businesses closed due to the spread of the virus.

With U.S. data expected to come in strong this week, we believe the dollar’s rise can continue, analysts at Brown Brothers Harriman said in a report on Monday.

Retail sales data for March is due on Thursday.

The dollar index dropped 0.04% against a basket of currencies to 92.164. It is holding above a three-week low of 91.995 reached on Thursday.

The euro was little changed on the day at $1.1900.

Treasury yields slipped from session highs but were higher on the day before the Treasury will sell 30-year bonds on Tuesday, and after Monday’s auctions saw good demand.

Federal Reserve Chairman Jerome Powell said on Sunday that the U.S. economy was at “an inflection point” and looked set for a strong rebound in the coming months, but he also warned of risks stemming from a hasty reopening.

Boston Fed President Eric Rosengren also said on Monday that the U.S. economy could see a significant rebound this year thanks to accommodative monetary and fiscal policy, though the labour market still has much room for improvement.

Sterling gained 0.22% to $1.3724 as traders cheered the latest phase of the British government’s economic reopening plan.

The dollar dropped 0.19% to 109.44 yen versus the Japanese currency.

U.S. dollar net short positions have fallen to their lowest in nearly three years, according to data published on Friday.

This article is for information purposes only.
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