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The dollar edged lower in early European trade Friday, as traders wagered that a hefty rise in U.S. consumer prices would not be enough to immediately jolt the Federal Reserve from its ultra easy monetary policy stance.
At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was down 0.1% at 89.990, marginally lower for the week.
USD/JPY rose 0.1% to 109.40, GBP/USD climbed 0.1% to 1.4179, while the risk-sensitive AUD/USD was marginally higher at 0.7753.
Data released on Thursday saw the U.S. consumer price index jumping 5.0% year-on-year in May, the sharpest rise in more than a dozen years, up 0.6% on the month, while core CPI, which excludes volatile food and energy prices, increased 3.8% year-on-year and 0.7% month-on-month in May.
Wall Street stocks ended higher on Thursday, with the S&P 500 closing above its prior record high set on May 7, as economic data appeared to support the Federal Reserve’s assertion that the current wave of heightened inflation will be temporary.
All three major U.S. stock indexes advanced, with market-leading megacap stocks putting the Nasdaq out front. But economically sensitive transports and smallcaps ended the session in negative territory.
The Labor Department’s consumer price index (CPI) data came in above consensus and added fodder to the debate over whether current price spikes could transform into long-term inflation, despite the Fed’s assurances to the contrary.
But a closer look showed that much of the price surge came from items such as commodities and airfares, and is therefore likely to be temporary.
Oil was down Friday morning in Asia but was set to end the week with a third weekly gain. The black liquid hovered near the $70 mark as investors continue to digest diverging fuel demand outlooks.
Brent oil futures were down 0.43% to $72.21 by 12:06 AM ET (4:06 AM GMT) and WTI futures were down 0.43% to $69.99. Futures in New York steadied on Friday after closing at the highest since October 2018 during the previous session.
With traffic in the U.S. and most of Europe almost back to pre-COVID-19 levels, the Organization of the Petroleum Exporting Countries (OPEC) forecasts that fuel demand recovery will pick up in the second half of 2021.
“Overall, the recovery in global economic growth, and hence oil demand, are expected to gain momentum in the second half,” the cartel said in its monthly report released on Thursday. The report also predicted oil demand could jump by about 5 million barrels a day, or around 5%, in the second half of 2021 compared with the first half.
However, investors also continued to digest Wednesday’s data from the U.S. Energy Information Administration that showed a bigger-than-expected draw of 5.241 million barrels in U.S. crude oil supply for the week ending June 4.
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