The U.S. dollar gained a bit against its major counterparts on Tuesday, as traders looked ahead to the data on consumer inflation for the month of May, due later in the week.
The inflation data is due out on Thursday. A strong inflation reading will likely fuel concerns that the Federal Reserve might start discussions on tapering its asset buying program.
The Federal Reserve’s next meeting is scheduled to take place on June 15 and 16.
U.S. Treasury Secretary Janet Yellen commented on Sunday that an interest rate hike would be positive for the economy. Yellen said inflation could reach as high as 3% this year as recovery continues.
Data released by the Commerce Department showed U.S. trade deficit narrowed in the month of April, dropping to $68.9 billion in the month from a revised $75.0 billion in March. Economists had expected the deficit to narrow to $69.0 billion from the $74.4 billion originally reported for the previous month.
The narrower trade deficit came as the value of exports jumped by 1.1% to $205.0 billion, while the value of imports slumped by 1.4% to $273.9 billion.
A report from the National Federation of Independent Business said the NFIB Small Business Optimism Index in the United States stood at 99.6 in May 2021, slightly down from the previous month’s five-month high and well below pre-pandemic levels. It was the first decline in morale this year.
The dollar index rose to 90.18 in the Asian session, and despite falling to around 90.00 by mid morning, recovered subsequently to 90.12, netting a gain of nearly 0.2%.
Against the Euro, the dollar strengthened to $1.2173, gaining from around $1.2190. Revised data from Eurostat showed GDP in the 19 countries sharing the euro contracted 0.3% sequentially for a 1.3% annual decline. That is a modest upside revision compared with the previous estimates of -0.6% and -1.8%, respectively.
The Pound Sterling weakened against the dollar, fetching $1.4154, as against $1.4180 Monday evening. U.K. retail sales increased notably in May driven by the relaxation of restrictions related to the coronavirus pandemic, data from the British Retail Consortium showed. Total sales grew 10% year-on-year in May and like-for-like sales climbed 23.7%.
The Yen weakened to 109.49 a dollar, from around 109.28. Japan’s gross domestic product contracted an annualized 3.9% on year in the first quarter of 2021, the Cabinet Office said in Tuesday’s final reading. That exceeded expectations for a decline of 4.8% following the 11.7% surge in the three months prior.
Against the Aussie, the dollar strengthened to 0.7737. The Swiss franc gained marginally to CHF 0.8967 against the dollar, while the Loonie weakened to 1.2114.
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