The US dollar got some prop against major currencies on Friday. Federal Reserve Bank of Philadelphia President Charles Plosser said at a conference in Cape Town Friday that the Fed’s 75 basis-point rate reduction this month was too much, and it risks losing its reputation of quelling inflation. Plosser said, “A less aggressive cut would have been more appropriate.”
The Fed’s reputation for keeping inflation low and stable “can be lost if we do not continue to act in a way that is consistent with it,” he said. He also said, “We’ve done a lot to support economic growth. We need to pay attention to inflation.” Plosser is a well-known inflation hawk, and he, together with Dallas Fed President Richard Fisher, dissented the FOMC decision to cut the Fed’s main lending rate to 2.25% on March 18.
US Economic Data
The final version of the Reuters/University of Michigan consumer sentiment survey for March saw the overall index decrease to 69.5, as widely expected, from 70.8 in February. The preliminary March reading was 70.5. This was the lowest reading since 1992. Another report Friday shows US personal spending for February increased by 0.1% compared to the month before. January spending had gone up an unrevised 0.4%. Even though the data is better than the 0.1% drop expected, the performance in February was the weakest since a 0.1% dip in September 2006. Meanwhile, the PCE price index excluding food and energy, climbed 2% on an annual pace in February. Core inflation also rose 2% in January as well.
Euro bulls were hesitant in pushing the Euro higher vs the US dollar before the weekend as rumors of European banks having huge writedowns are making rounds, and the currency pair trades between 1.5750-1.5850 most of the time. USD/CHF faces resistance around 1.0000.