NEW YORK- The dollar clung to modest gains against the euro after data showed falling US consumer spending and cooling inflation, and as investors awaited a slew of central bank meetings next week.
Consumer spending, which accounts for more than two-thirds of US economic activity, dropped 0.2 percent last month, the Commerce Department said on Friday. Data for November was revised lower to show spending slipping 0.1 percent instead of gaining 0.1 percent as previously reported. Economists polled by Reuters had forecast consumer spending dipping 0.1 percent.
The Commerce Department reported the Federal Reserve’s preferred gauge for inflation, the personal consumption expenditures (PCE) price index, rose 0.1 percent last month after a similar rise in November.
“US PCE landed pretty much as expected and has very little impact on the Fed’s upcoming decision,” said Simon Harvey, head of FX Analysis at Monex Europe.
“The latest inflation data has allowed Fed officials to guide markets to a slower pace, and given their preference on the duration of restrictive monetary policy, we expect a moderation in price pressures to result in the Fed taking rates to a terminal level of 5 percent by March,” Harvey said.
Traders of futures tied to the Fed’s policy rate kept bets on Friday that the US central bank will raise interest rates just once more beyond next week’s widely expected quarter-point hike before stopping. The current target range is 4.25 percent to 4.5 percent.
The euro was 0.17 percent lower at $1.08725, but not far from the nine-month high of $1.09295 touched on Monday. For the week, the common currency was up about 0.2 percent. – Reuters
