The US dollar index plunges despite a pick-up in inflation numbers

Daily Currency Update

USD - United States DollarThe US dollar fell 0.40 at the time of this writing. US consumer prices increased in April, which could support the Fed argument that recent low inflation readings were transitory and allow the central bank to keep interest rates unchanged for a while. The Commerce Department said early today that its Personal Consumption Expenditures (PCE) price index increased 0.3 percent in April, after rising 0.2 percent in March. That lifted the annual increase in the PCE price index to 1.5 percent from 1.4 percent in March. Fed Chairman Jerome Powell had noted that the soft inflation readings are temporary and the Fed has kept rates unchanged and it has signaled little inclination to adjust monetary policy anytime soon. However, the MNI Chicago Business Barometer increased by 1.6 points to 54.2 in May from 52.6 in April, worse than the forecast of 55.1. The MNI report noted that despite the pick-up in sentiment, the survey points to softness in business activity. Furthermore, it is evident that business confidence in the second quarter is going to be significantly weaker than the first quarter, which was already at sluggish levels.