On Thursday, the US Dollar weakened against major currencies and precious metals despite the release of firm US inflation data. The Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve's preferred inflation gauge, rose to 4.1% year-over-year in May from 3.8% in April, matching market expectations. The core PCE Price Index increased to 3.4% YoY, also in line with forecasts [1][2][3]. Monthly, headline PCE rose 0.4% and core PCE remained at 0.3% [2].
The Euro gained modestly, with EUR/USD trading near 1.1380, as the US Dollar lost momentum despite strong US economic data. US Initial Jobless Claims fell to 215K for the week ending June 20, below expectations and down from a revised 227K. The final estimate for Q1 US GDP showed annualized growth of 2.1%, revised up from 1.6% [1][3]. In the Eurozone, German GfK Consumer Confidence for July improved slightly to -29.2 from -29.7, providing modest support to the Euro, though sentiment remained weak [1]. Technical analysis indicated EUR/USD maintained a bearish near-term bias, trading below key moving averages, with resistance at 1.1383 and 1.1388, and support at 1.1360, 1.1336, and 1.1324 [1].
Similarly, the British Pound advanced 0.22% against the US Dollar, with GBP/USD trading at 1.3194 after rebounding from daily lows. Despite strong US data, including a 2.1% Q1 GDP growth and a drop in jobless claims, the US Dollar Index (DXY) fell 0.17% to 101.41, and US Treasury yields declined. Durable Goods Orders contracted by 4.5% in May, in line with expectations. Market participants attributed the Dollar's weakness to profit-taking and a slight reduction in expectations for further Fed tightening, with traders now anticipating at least 30 basis points of easing by year-end, down from nearly 40 basis points previously [3]. In the UK, political developments included the resignation of Prime Minister Keir Starmer and speculation about his successor, Andy Burnham, and potential changes in the Chancellor position [3].
In commodities, Silver (XAG/USD) rebounded 2.16% to around $58.65, recovering some recent losses as the US Dollar pulled back following the inflation data. The DXY fell 0.24% to 101.30, supporting Dollar-denominated assets. Both Personal Income and Personal Spending in the US rose 0.7% in May, exceeding expectations. Despite the rebound, analysts noted that the Fed is expected to maintain a restrictive policy stance, which may limit further gains in Silver [2].
Across all sources, the consensus is that while US inflation remains firm and economic data is robust, the lack of an upside surprise in core inflation and some profit-taking have led to a modest retreat in the US Dollar, benefiting the Euro, Pound, and Silver. Market participants are adjusting their expectations for future Fed policy, with a slight easing in rate hike bets following the latest data [1][2][3].
CONCLUSION
Despite firm US inflation and strong economic data, the US Dollar retreated as markets reacted to in-line PCE readings and adjusted expectations for future Fed policy. This led to gains in the Euro, British Pound, and Silver. The market takeaway is a cautious optimism for non-Dollar assets, though the Fed's restrictive stance may cap further upside.