NEW YORK: The dollar edged down against the euro on Monday (May 16) in profit taking after recent gains, as traders awaited a key US inflation report on consumer prices.
"More than anything, I think it's a little bit of profit taking," said Omer Esiner of Commonwealth Foreign Exchange, citing a quiet day in economic news. Last week, the dollar climbed to a two-week high "in the wake of some relatively strong data, particularly Friday's retail sales number," he said.
The dollar slipped to US$1.1318 per euro around 2100 GMT Monday, from US$1.1309 at the same time Friday.
This is the number markets are watching Tuesday
Consumer price inflation (CPI) data is expected to be the most interesting data for markets Tuesday, but it's unlikely to change anyone's view on the Federal Reserve.
Core CPI, without energy and food prices, is expected to be 2.1 percent on an year-over-year basis, from 2.2 percent.
"We see core (CPI) ticking down to 2.1, which is in line with the consensus. The Fed's not going to be in any rush if inflation is slowing down," said John Briggs, head of strategy at RBS. "There's nothing in that number that's going to get the Fed to move."
The Fed's preferred inflation measure is the PCE Deflator, and that is running at about 1.6 percent, below the Fed's target of 2 percent inflation. But because core CPI has been running above 2 percent, traders have been watching it closely as higher inflation could cause the Fed to raise rates sooner.
Oil prices push past $48-a-barrel, while analysts wait for the selloff
Oil prices gained further traction in early Asian trade Tuesday, buoyed by the ongoing supply outages and bullish outlook that the global market has flipped into a deficit.
However, analysts expect profit-taking and lack of confidence in the rally will likely hinder prices from climbing higher.
“The oil market has gone from nearing storage saturation to being in deficit much earlier than we expected,” said Goldman Sachs in a report Monday, adding that the global oil market likely shifted into a deficit in May. The bullish comments pushed WTI crude to its highest settlement since early November on Monday.
“The $50 mark is more of a psychological barrier. The truth is, there is still plenty of oil in the market and the glut is still there,” said Avtar Sandhu, chief commodity analyst at Phillip Futures.
“What investors need is a more sustained and stabilized rally. Profit-taking could take prices back down to the $45 level,” said Sandhu.
Reference: MarketWatch,CHANNEL NEWSASIA,CNBC
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