The euro was able to ride the highs of strong data out of the Eurozone throughout the day Wednesday and another better-than-expected economic release for the region lifted the EUR/USD pair Thursday. The dollar extended losses across the board early Thursday as the mood improved around Italy’s political crisis. However, a key inflation measurement for the U.S. comes out as expected, helping the greenback recover some losses.
Eurozone CPI surprises
The euro is continuing to get help from strong data this week.
The consumer price index for the Eurozone for May grew 1.9% year over year, compared to 1.6% expected. The core CPI also slightly beat expectations, coming out at 1.1%.
On Wednesday, confidence measurements for the Euro-area were better than expected and data out of Germany beat expectations. The EUR/USD pair rose to above 1.166 by the end of the day.
After the CPI release this morning, the pair jumped above 1.17. It traded just below the mark as the U.S. personal consumption expenditure was released at 8:30 a.m. EST and is now back lower around 1.166.
U.S. inflation measurement meets expectations
The dollar is regaining some of its losses from earlier Thursday with the help of personal consumption expenditures – the Fed’s preferred inflation measurement.
The April PCE readings largely met expectations, allowing the dollar to gain on the euro, pound and Canadian dollar, all of which saw large gains against the dollar in the past 24 hours.
Core PCE grew 1.8% year over year as expected and headline PCE year over year also met estimates of 2% growth. Month over month, core PCE slightly beat expectations of 0.1%, coming out at 0.2%.
EUR/USD is dipping lower to 1.166 and GBP/USD is slightly down around 1.332. The USD/CAD pair was trading around 1.282 before the release and is edging closer to 1.290. This is likely more to do with the worse-than-expected Canadian GDP numbers released at the same time.
U.S. weekly jobless claims are also doing their part to boost the dollar. The initial jobless claims for the week ending May 25 were 221,000, lower than the expected 228,000. Continuing jobless claims for the week ending May 18 were also lower than expected at 1.726 million.
Weak Canadian GDP challenges optimistic BoC
The Canadian dollar got some major help from the Bank of Canada on Wednesday when it released a hawkish monetary statement alongside its decision to hold interest rates steady.
The USD/CAD pair fell from above 1.301 to 1.283 almost immediately after the statement. The Canadian dollar continued to gain off of the optimism, pushing the pair as low as 1.281 before the GDP release this morning.
Annualized GDP for Q1 was 1.3% compared to 1.8% expected. GDP month over month grew 0.3%. The weak numbers failed to live up to the BoC hype of yesterday.
Trade tariff deadline looms
The exemption on steel and aluminum tariffs for Mexica, Canada, the E.U., Argentina, Australia and Brazil is set to expire on June 1.
The original deadline was May 1 and the Trump administration pushed out the end of the exemption one month. The White House had said it was the final extension and tied it to NAFTA negotiations for Canada and Mexico.
There a no signs that the U.S., Mexico and Canada are close to reaching a deal on NAFTA renegotiations, which would then still need to pass through Congress.
Meanwhile, Commerce Secretary Wilbur Ross is in Paris for a World Trade Organization meeting. He then heads to Beijing for more trade talks with Chinese officials.