Consumer Spending Miss Weighs on U.S. Dollar

The U.S. Dollar closed lower against a basket of weighted-currencies on Friday, but was still able to hold on to a one week rise of 1 percent while helping to post its first monthly gain since February. Despite the slight setback, the Greenback continued to be supported by a rise in expectations for inflation and U.S. interest rate hikes.

The December U.S. Dollar Index settled on Friday at 92.883, down 0.049 or -0.05%.

On Friday, the market was particularly sensitive to a stronger Euro which is heavily-weighted in the index and offsetting economic data.

U.S. Economic Data

U.S. investors had to digest a slew of economic data on Friday. There were no major reports, but just enough minor reports to keep investors occupied.

Early in the session, traders had a chance to react to reports on the Core PCE Price Index, Personal Spending and Personal Income.

U.S. Core PCE Price Index

According to the Core PCE Price Index, inflation remained benign in August. As a result, the annual increase in the core PCE price index slowed to 1.3 percent after advancing 1.4 percent in July. That was the smallest year-on-year increase since November 2015.

The core PCE is the Federal Reserve’s preferred inflation measure and has a 2-percent target. The annual core PCE price index slowed to 1.3 percent after advancing 1.4 percent in July.

U.S. Consumer Spending and Personal Income

The Commerce Department said on Friday consumer spending, which accounts for more than two-thirds of U.S. economic activity, edged up 0.1 percent last month. This met expectations but came in below July’s 0.3 percent read. The government said the data reflected the effects of Hurricane Harvey.

Hurricane Harvey may have also impacted income last month. Personal income rose 0.2 percent last month after increasing 0.3 percent in July.

Chicago PMI and Consumer Sentiment

Chicago PMI came in at a robust 65.2, much higher than the 58.6 estimate and 58.9 previous read. However, this report was offset by a Revised University of Michigan Consumer Sentiment reading which came in at 95.1. This was below the 95.3 estimate and previous month’s reading.

The U.S. Dollar actually fell to its session low after the release of the U.S. spending data.