US Dollar Rises on Strong Data

US Dollar Rises on Strong Data

That was the biggest gain since February 2017 and followed a 1.7 percent rise in February, the Commerce Department said on Monday.

Excluding the volatile food and energy components, the PCE price index soared 1.9 percent in the 12 months through March, the biggest increase since February 2017, after increasing 1.6 percent in February.

USA consumer prices accelerated in the year to March, with a measure of underlying inflation surging to near the Federal Reserve's 2 percent target.

Investors should be prepared for a higher inflationary environment and can utilize targeted ETF strategies to hedge against the negative effects of inflation.

Earlier this year, the correlation between USA yields and the dollar had broken down as investors focused more on trade frictions and tense global politics.

One more time, this "by itself, would not justify a change in the projected path for the federal funds rate". It was last at the 2 percent threshold in 2012. March's Personal Consumption Expenditure (PCE) results fell short of forecasts month-on-month, as did the latest pending home sales results and Chicago PMI.

"The key USA dollar driver has been the divergence between economic data in the US and the rest of the world, and US data continues to look comparatively robust" Morgan Stanley said.

Overseas, investors will be watching North Korea, after the nation's leader met with the leader of South Korea on Friday. Based on that measure, the economy slowed in the first quarter.

Consumers resumed spending in March following two months of sluggishness, while their incomes continued to grow, the Commerce Department said Monday.

Analysts are expecting strong USA growth throughout 2018, spurred by increasing federal spending and a rush of economic activity spurred by the 2017 tax cuts. The data was included in last Friday´s advance first-quarter gross domestic product report.

The rise in consumer spending, which accounts for 70% of the economy, gives the economy some momentum at the end of an otherwise weak quarter and provides some support for forecasts that consumption will accelerate this quarter as tax cuts and a gradual pickup in wages filter into Americans' bank accounts and sentiment.

The two-month pullback came after strong holiday spending coupled with hurricane-induced purchases in the fourth quarter.

With year-over-year core PCE seen at or near 2%, its statement will acknowledge rising inflation, and perhaps even applaud meeting its dual mandate of maximum employment and stable prices. Personal income increased 0.3 percent in the month, the same growth in the previous month.

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