Fundamental Comment

Dollar snaps gains on Trump’s remarks, weak inflation

Dollar snaps gains on Trump’s remarks, weak inflation

The U.S. dollar snapped its earlier gains on Tuesday after President Donald Trump’s criticism to the Federal Reserve and as low inflation triggered expectations the Fed would cut interest rates.

The dollar index retreated from a high of 96.84 to close at 96.67 after Trump said the Federal Reserve ‘don’t have a clue’, and should cut interest rates to help weaken the US dollar.

“The Euro and other currencies are devalued against the dollar, putting the U.S. at a big disadvantage,” Trump tweeted.

On the other hand, the US Bureau of Labor Statistics reported on Tuesday that PPI rose 0.1% on a seasonally adjusted basis in May, matching forecasts, supported by increased cost of hotel accommodation and other services.

US producer price growth surged at their slowest pace in a year last month, in line with expectations, but continued to rise for a fourth month in a row, adding to the background of low inflation.

Core PPI, which excludes volatile food and energy categories, soared 0.2% in May, following a 0.1 percent rise in April.

The Federal Open Market Committee may decide to cut interest rates in the coming months in the light of weak job data and inflation.

Consumer prices data due on Wednesday may signal a slowdown in the monthly pace of increase to 0.1 percent after a 0.3 percent rise in April.

The dollar index fell sharply on Friday to a two-month low of 96.39 after the release of dismal U.S. non-farm payrolls figures for May.

Share Article