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US Dollar Rallies, but Gains Capped due to Mixed Data

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US Dollar Rallies, but Gains Capped due to Mixed Data

The US dollar advanced Thursday amid signs consumer prices were increasing and the labour market was improving, supporting the view the US economy was gaining traction in the second quarter.

The US dollar index, a weighted average of the greenback’s performance versus six major peers, advanced 0.24 percent to 80.27. The index would later backtrack to 80.12 as investors reacted to mixed economic data. The index has advanced more than 1 percent since last Friday.

In the United States, jobless claims fell 24,000 to 297,000 in the week ended May 10, the lowest level since 2007, the Labor Department reported today. The four-week moving average slipped from 325,250 to 323,250.

Continuing jobless claims fell from 2.676 million to 2.667 million, official data showed.

Consumer prices advanced 0.3 percent in April, as the cost of shelter, gasoline, medical care and other consumer staples rose, the Commerce Department reported today. April marked the fastest advance in consumer prices in ten months, a sign inflation was starting to pick up after two years of very low levels.

Year-on-year, consumer prices accelerated 2 percent, following a gain of 1.5 percent the prior month.

The so-called core measure, which excludes volatile products such as food and energy, advanced 0.2 percent in April and at an annualized pace of 1.8 percent. The annual gain was the biggest since August 2013, official data showed.

A separate report from the Board of Governors of the Federal Reserve showed industrial production unexpectedly declined in April, as broad-based declines in utilities and manufacturing offset a strong month for the mining sector.

Total industrial production declined 0.6 percent in April, following a gain of 0.9 percent the prior month. The capacity utilization rate dipped from 79.3 percent to 78.6 percent, official data showed.

The EURUSD declined sharply Thursday, hitting a session low of 1.3650. The pair consolidated at 1.3670, declining 0.32 percent. The pair faced considerable selling pressure amid signs the Eurozone economy expanded slower than forecast in the first quarter. Eurozone gross domestic product increased 0.2 percent in the first quarter, half the rate economists forecast. Year-on-year, Eurozone GDP expanded 0.9 percent, falling short of forecasts calling for 1.1 percent.

Eurozone consumer inflation rose 0.7 percent annually in April, the European Commission confirmed today. The so-called core measure, which excludes volatile products such as food and energy, climbed 1 percent, edging out the initial estimate of 0.7 percent.

The USDJPY fell further below the 102 handle. The pair consolidated at 101.6490, a loss of 0.19 percent

The USDCAD declined for a second consecutive day. The pair hit a daily low of 1.0850 before rebounding to 1.0877, declining 0.1 percent. In Canadian data, manufacturing shipments rose faster than forecast in March at a pace of 0.4 percent, Statistics Canada reported today in Ottawa.

The GBPUSD rebounded after hitting a daily low of 1.6786. The pair rallied to 1.6786, climbing 0.12 percent. The pair declined Wednesday after the Bank of England attempted to taper rate-hike expectations in the latest Inflation Report. The strength of UK recovery, however, is likely to keep sterling supported over the short-term. The GBPUSD fell just short of 1.70 last week.

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