By Jateen Trivedi
Last week, the dollar index remained firm ahead of the US retail sales data release on Tuesday. However, when the data revealed that May retail sales grew by only 0.1% month-over-month, falling short of the 0.3% projected by economists in a Reuters poll, the dollar index declined.
Additionally, retail sales figures for April were revised down to a 0.2% drop from the previously reported unchanged level. This adjustment reinforced expectations that the US Federal Reserve might start cutting rates soon.
The dollar index later strengthened after US business activity, measured by the purchasing managers’ index (PMI), hit a 26-month high due to a recovering labor market.
The S&P Global Flash US Composite PMI Output Index, which tracks both manufacturing and services sectors, rose to 54.6 this month, the highest since April 2022. In May, the reading was 54.5. The S&P Global survey’s measure of new orders received by private businesses in the US increased to 53.4 this month from 51.7 in May.
The rupee experienced volatility, trading between 83.65 and 83.25, influenced by the fluctuating dollar index. Additionally, crude oil prices increased by 3.35% last week, contributing to the rupee’s instability. This week’s fiscal deficit and infrastructure output data for May are expected to keep the rupee trading between 83.25 and 83.60.
In the US, GDP data and new home sales data will keep the dollar index active in the first half of the week. However, the most significant event will be the Core PCE Price Index release on Friday, June 28.
This index is a crucial data point on the Federal Reserve’s watch list. Expectations are for a lower reading of 2.6% year-over-year for May, down from 2.8%. The dollar is expected to trade in a range of 104.80 to 105.45.
Elsewhere, the Bank of Japan (BOJ) will release the Core CPI on Tuesday, which is expected to show a year-over-year increase of 1.9%, up from 1.8%. The USD/JPY pair is currently very volatile, with resistance at 160 and support at 158, and this volatility is expected to continue.
(Disclaimer: Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities . Views, recommendations, opinions expressed are personal and do not reflect the official position or policy of Financial Express Online. Readers are advised to consult qualified financial advisors before making any investment decisions. Reproducing this content without permission is prohibited.)