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US dollar index little changed ahead of CPI

H.S. Borji
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US dollar index little changed ahead of CPI

The US dollar was little changed against a basket of currencies Monday, as investors remained on the sidelines ahead of an active Tuesday session headlined by US consumer inflation data.

The US dollar index, a weighted average of the greenback’s performance against six major peers, increased 0.04 percent to 80.55. The dollar index has advanced more than 0.4 percent since July 15 on renewed optimism the Federal Reserve may consider raising interest rates sooner than expected.

In economic data, the US economy advanced at a strong pace in June, supporting the view GDP growth will rebound sharply after a disastrous first quarter.

With a reading of 0.12, the national activity index was above zero for the fourth consecutive month, the Federal Reserve Bank of Chicago reported today. The three-month average of 0.13 suggests the US economy accelerated at an annualized pace of 3.2 percent in the second quarter.

Economists anticipate the US economy expanded between 3 percent and 4 percent annually in the second quarter, following a 2.9 percent drop in the first three months of the year.

In total, 44 of the index’s 85 individual indicators made positive contributions last month. The index remains below the critical threshold of 0.70, which indicates a sustained period of rising inflation.

US consumer prices increased 0.4 percent in May, the Commerce Department reported last month. Compared to May 2013, consumer prices accelerated 2.1 percent.

On Tuesday the Commerce Department is expected to show similar readings. Economists forecast inflation to have increased at an annualized rate of 2.1 percent in June.

Month-on-month, consumer prices are forecast to increase 0.3 percent.

So-called core prices, which strip away volatile elements such as food and energy, are forecast to have increased 2 percent annually in June, similar to the previous month.

Separately, the National Association of Realtors will report on existing home sales Tuesday. The sale of previously-owned homes is forecast to have increased 1.7 percent in June.

Keeping with the housing data, the Federal Housing Finance Agency will release its monthly housing price index Tuesday. House prices are forecast to have increased 0.4 percent in May following no change the previous month.

In currency news, the EURUSD held its ground, trading at 1.3521. The pair faces initial support at 1.3483 and resistance at 1.3544.

In Eurozone data, German producer prices declined at an annual rate of 0.7 percent in June, the Federal Statistical Office reported today.

Separately, industrial sales in Italy declined at an annualized rate of 2.5 percent in May.

The GBPUSD edged lower for a third consecutive day, declining 0.11 percent to 1.7066. The pair faces initial support at 1.7042 and resistance at 1.7124.

The USDJPY was little changed at 101.35 after hitting a session low of 101.09 on Friday. The pair faces initial support at 101.14 and resistance at 101.52.

Japan’s economic calendar heats up Tuesday with the all activity index and the leading economic index.

The USDCAD was little changed Monday, declining 0.03 percent to 1.0730. The pair faces initial support at 1.0704 and resistance at 1.0766.

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