FX.co ★ Dollar Index Edges Up Amidst Softer PCE Data

The Dollar Index experienced slight gains during the week ending June 28, influenced by a decline in PCE-based inflation readings. A continued weakness in the Japanese yen also contributed to the performance of the 6-currency index. Over the week, the U.S. dollar weakened against the euro, while the Australian and Canadian dollars maintained their positions against the British pound, the Japanese yen, the Swedish krona, and the Swiss franc.

Starting at 105.80 on June 21, the Dollar Index rose by 0.07 percent over the week. After hitting a weekly low of 105.37 on Tuesday, it peaked at 106.13 on Wednesday and closed the week at 105.87.

The U.S. Bureau of Economic Analysis reported on Friday that the year-on-year PCE Price Index dropped to 2.6 percent in May from 2.7 percent in the previous month. Similarly, the core component decreased to 2.6 percent from 2.8 percent. The month-on-month PCE Price Index remained flat, slipping from 0.3 percent the previous month, while the core component fell to 0.1 percent from 0.3 percent.

Despite the easing in the PCE figures, the Dollar held firm at the previous week's levels, supported by stronger-than-expected PMI readings.

With political uncertainty in Europe, the EUR/USD pair rose by 0.21 percent for the week ending June 28. After peaking at 1.0747 on Monday, the pair dropped to a low of 1.0666 on Wednesday before closing at 1.0713, up from 1.0691 a week earlier. The week’s data showed weaker-than-expected business climate and consumer confidence in Germany, along with a reduction in consumer price inflation in France.

Conversely, the GBP/USD pair declined during the same period, influenced by dovish rate cut signals, casting a bearish outlook on the pound. Closing at 1.2645 on June 21, the pair slipped 0.02 percent over the week, ending at 1.2642. It traded between a high of 1.2704 on Tuesday and a low of 1.2612 on Thursday.

Boosted by a rebound in consumer confidence, the Australian dollar gained 0.42 percent against the U.S. dollar over the week ending June 28. Rising from 0.6639 on June 21, the pair closed at 0.6667, fluctuating between a high of 0.6690 on Wednesday and a low of 0.6619 on Friday.

The U.S. dollar also strengthened against the Japanese yen last week, despite growing speculation of regulatory intervention. Although the Bank of Japan's Summary of Opinions hinted at a possible rate hike in July, a dovish market perception of the BoJ kept the yen subdued. The USD/JPY pair closed at 160.83, up 0.65 percent from 159.79 a week earlier, trading within a range of 158.82 on Monday and 161.28 on Friday. Sentiment for the greenback was further bolstered by the potential for a trade war between China and the West.

This morning, the ISM Manufacturing PMI from the U.S. indicated an unexpected decline. Anticipation surrounds Fed Chair Jerome Powell's speech and the upcoming JOLTS labor market report on Tuesday. The release of the recent FOMC minutes and the Services PMI are scheduled for Wednesday. In light of these events, the Dollar Index is hovering near 105.64.

The EUR/USD pair has risen to 1.0758 following French election results that suggest a reduced likelihood of expansionary fiscal policies. Meanwhile, Germany's CPI fell to an unexpectedly low 2.2 percent.

With the U.K. general election slated for July 4, the GBP/USD pair is near 1.2692. Ahead of the Reserve Bank of Australia meeting minutes, the AUD/USD pair is at 0.6679.

The USD/JPY has reached a 38-year high of 161.46 following a downward revision in Japan's PMI readings for June. The pair is currently at 161.30 as speculation mounts regarding a potential foreign exchange intervention by the Japanese Ministry of Finance.