Daily Morning Report 29.03.2016

The yen weakened in Asia on Monday, giving up earlier gains after a mixed data set on household spending, unemployment, and disappointing retail sales.

In Japan, household spending for February rose 1.2%, beating the fall of 1.5% seen year-on-year.

At the same time, the unemployment rate ticked up to 3.3%, from an expected steady at 3.2%, while retail sales rose 0.5%, less than the 1.7% gain year-on-year seen.

Investors were looking ahead to a speech by Fed Chair Janet Yellen on Tuesday for fresh indications on the path of interest rates.

Higher interest rates would boost the dollar by making it more attractive to yield-seeking investors.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.08% to 96.07.

Overnight, the dollar slid lower against a basket of the other major currencies on Monday after data showing that U.S. consumer spending ticked higher last month, but inflation eased.

Trading conditions remained light, with financial markets in Europe closed for the Easter holiday.

Personal spending edged up 0.1% in February the Commerce Department said, in line with economists’ expectations.

January’s consumer spending was revised down to 0.1% from a previously reported 0.5%.

Personal income rose by a seasonally adjusted 0.2%, above forecasts for a 0.1% gain.

Inflation as measured by the PCE index, the Federal Reserve’s preferred inflation measure, dipped 0.1% last month, due in large part to lower energy costs
The PCE index rose just 1% on a year-over-year basis, slowing from 1.2% in January.

The data indicated that the Fed may raise interest rates only gradually this year, despite the tightening labor market.

Another report showed that U.S. pending home sales jumped 3.5% in February to a seven-month high, reversing January’s 3% decline.

The dollar has strengthened in recent sessions after an upward revision to U.S. fourth-quarter growth and hawkish comments by Fed officials bolstered expectations that the central bank may act soon to hike interest rates.