The US dollar rose on Friday after data showed that a key inflation gauge met expectations, with consumer spending and personal income rising. This strengthened expectations that the Federal Reserve (Fed) will likely cut interest rates by 25 basis points next month, according to Reuters. The dollar gained 0.5% to 145.66 yen, marking a weekly gain of 0.9% and hinting at its biggest weekly rise since mid-June. Despite this, the dollar lost 2.9% against the Japanese yen in August, marking its second consecutive monthly decline. Friday’s data showed that the Personal Consumption Expenditures (PCE) price index rose 0.2% in July, in line with expectations, after an unchanged increase of 0.1% in June. On an annual basis, the PCE price index climbed 2.5%, matching June’s growth. Consumer spending rose 0.5% last month, following a 0.3% increase in June. The dollar index, which measures the greenback against six major currencies, climbed to a 10-day high after the inflation data, reaching 101.52, representing a 0.1% gain on the week and its best weekly performance since early April. However, the index fell 2.4% in August, its weakest performance since last November. The dollar continues to benefit from month-end flows, after Fed Chair Jerome Powell’s speech at Jackson Hole last week signaled a strong likelihood of an interest rate cut at the September meeting. The euro fell to $1.1074, marking a 1% decline on the week, suggesting its biggest weekly loss since April. In August, the euro rose 2.3%, its best monthly performance since November 2023, while the European Central Bank (ECB) still plans to lower interest rates further next month. The common European currency fell to its lowest level in over a week on Thursday and closed the day down 0.4% after German inflation came in lower than expected, strengthening investors’ expectations of further rate cuts by the ECB.
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