Mixed Economic Data Impacts Dollar, Euro, and Sterling.

• US Dollar: Declined slightly due to mixed economic data, including a slight miss in GDP growth and higher-than-expected core PCE inflation, signaling persistent inflationary pressures.
• Euro: Strengthened against the Dollar, supported by improved German consumer confidence and stable Eurozone inflation, reflecting effective ECB monetary policy.
• Sterling: Saw modest gains with positive UK mortgage approvals and a reassuring speech from Prime Minister Rishi Sunak, despite a drop in retail sales volumes.
• Market Sentiment: Increased risk appetite and equity market gains reduced demand for the Dollar as a safe-haven currency.
• Central Bank Policies: Continued focus on potential rate hikes from the Federal Reserve, European Central Bank, and Bank of England to manage inflation.

Dollar The US Dollar experienced a slight decline today following mixed economic data releases. The latest GDP growth figures showed an annualized increase of 2.1% for Q1, marginally below the expected 2.2%. This modest growth was complemented by a rise in pending home sales, which increased by 0.7% in April, surpassing forecasts of 0.5%. However, the core personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge, rose by 4.6% year-over-year in April, slightly above the anticipated 4.5%, suggesting persistent inflationary pressures. Despite this, the Dollar Index (DXY) edged lower by 0.2%, reflecting a cautious sentiment among investors as they await more clarity on the Fed’s next moves. The Dollar’s weakening was also influenced by a rebound in risk appetite, with equity markets posting gains and reducing demand for the safe-haven currency.

Euro The Euro strengthened against the Dollar, buoyed by robust economic data from the Eurozone. Germany, the bloc’s largest economy, reported a notable increase in consumer confidence, with the GfK Consumer Climate Index rising to -6.5 for June, up from -7.7 in May. Additionally, Eurostat confirmed that inflation in the Eurozone remained steady at 7.0% year-over-year in May, aligning with expectations. This stability in inflation is seen as a sign that the European Central Bank’s (ECB) monetary tightening measures are having the intended effect without excessively stifling economic activity. Furthermore, ECB President Christine Lagarde reiterated the central bank’s commitment to achieving its 2% inflation target, signaling potential further rate hikes. Consequently, the Euro appreciated by 0.3% against the Dollar, reaching a two-week high.

Sterling The British Pound saw modest gains as the latest economic data painted a mixed yet cautiously optimistic picture. UK mortgage approvals for April came in at 50,500, slightly above the forecast of 49,700, indicating a resilient housing market despite higher borrowing costs. However, the Confederation of British Industry (CBI) reported that retail sales volumes fell in the year to May, with the balance of retailers reporting higher sales dropping to -10, down from -5 in April. This decline in retail activity highlights the ongoing challenges facing UK consumers amid persistent inflation. On the political front, Prime Minister Rishi Sunak’s speech on economic stability and growth strategies provided a confidence boost, which helped Sterling climb by 0.2% against the Dollar. Traders are also closely watching the upcoming Bank of England (BoE) meeting, with expectations of another rate hike to combat inflation.