Dollar ends with modest gain as US 10-year yield rallies to one-week high

Although the greenback initially slipped against its majors peers in New York morning on Friday after U.S. PCE data was in line with market forecast, dollar then staged a rebound across the board in tandem with U.S. Treasury yields, the benchmark 10-year rallied to a one-week high of 1.5445%. 

Reuters reported the personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, increased 0.5%, below economists’ expectations of a 0.6% increase. In the 12 months through May, the so-called core PCE price index shot up 3.4%, the largest gain since April 1992. 

In other news, Reuters saif Federal Reserve Bank of Minneapolis Neel Kashkari on Friday said he expects recent high inflation readings will not last, and Americans will return to the labor market in large numbers by the fall.    "We should see a lot more labor supply in the fall," Kashkari said in a virtual event hosted by the Minnesota Council of Nonprofits and the Minnesota Council of Foundations, once the three main factors holding back labor supply - school and daycares closed, fear of the virus, and extra unemployment benefits provided by Congress - have faded.     He said that in general he is a "big skeptic" of employers who complain of worker shortages, saying a large part of it is a reluctance to raise wages.

Versus the Japanese yen, dollar met renewed selling at 110.98 at Asian open and weakened steadily to 110.68 in European morning. The pair then fell to session lows at 110.49 in New York morning after the release of U.S. PCE data before rebounding back to 110.87 in tandem with U.S. yields. 

The single currency traded with a firm bias in Asia and gained to 1.1950 in early European morning before ratcheting higher on usd's weakness to a one-week high at 1.1975 in New York morning. However, lack of follow-through buying triggered profit-taking and the pair later fell back to Asian low of 1.1927 and last traded at 1.1936 near the close. 

The British pound briefly rebounded to 1.3935 near Asian midday after Thursday's selloff on Bank of England's dovish hold before falling to 1.3892 ahead of New York open. However, sterling then climbed in tandem with euro to 1.3931 in New York morning on usd's weakness before tumbling to session lows of 1.3870 as the greenback rebounded broadly.

G7 economic data to be released this week:

U.S. Dallas Fed manufacturing business index on Monday. 

Japan unemployment rate, retail sales, France ILO unemployment rate, consumer confidence, EU business climate, economic sentiment, industrial sentiment, services sentiment, consumer confidence, Germany CPI, HICP, U.S. redbook, U.S. monthly home price and consumer confidence on Tuesday. 

U.K. BRC shop price index, Japan industrial output, China NBS non-manufacturing PMI, NBS manufacturing PMI, New Zealand NBNZ business outlook, NBNZ own activity, Japan consumer confidence, construction orders, housing starts, Germany import prices, U.K. GDP, current account, nationwide house price, France consumer spending, CPI, producer prices, Swiss KOF indicator, investor sentiment, Germany unemployment change, unemployment rate, Italy producer prices, CPI, EU HICP, U.S. MBA mortgage app, ADP employment change, Chicago PMI, pending home sales, Canada GDP and producer prices on Wednesday. 

Australia AIG manufacturing PMI, manufacturing PMI, trade balance, imports, exports, New Zealand building permits, ANZ business confidence, ANZ activity outlook, Japan Tankan big manufacturing index, Tankan big non-manufacturing index, Tankan small manufacturing index, Tankan small non-manufacturing index, Jibun Bank manufacturing index, China Caixin manufacturing PMI, Swiss CPI, retail sales, manufacturing PMI, Italy Markit manufacturing PMI, unemployment rate, France Markit manufacturing PMI, Germany Markit manufacturing PMI, EU Markit manufacturing PMI, unemployment rate, U.K. Markit manufacturing PMI, U.S. initial jobless claims, continuing jobless claims, Markit manufacturing PMI, construction spending, ISM manufacturing PMI and Canada market holiday, Markit manufacturing PMI on Thursday. 

Germany retail sales, France budget balance, EU producer prices, U.S. non-farm payrolls, private payrolls, unemployment rate, average earnings, international trade balance, goods trade balance, durables ex-defense , durable goods, durables ex-transport, factory orders, Canada building permits, trade balance, exports, imports and Markit manufacturing PMI on Friday.