PLATTSBURG, NY U.S. inflation is a bit low but should rebound alongside wages as the labor market continues to improve, an influential Federal Reserve official said on Monday, reinforcing the message that a recent patch of weak data is unlikely to derail plans to keep raising interest rates.
The US dollar index against a group of major currencies was flat at 97.187. "If Dudley confirms that the Fed will remain hawkish towards interest rate hikes, I do not think gold will be able to recover anytime soon", said Argonaut Securities analyst Helen Lau. Data released before the Fed meeting on Wednesday showed USA consumer prices unexpectedly fell in May and retail sales recorded their biggest drop in 16 months, suggesting a softening in domestic demand.
"My view is that Dudley won't sound too dovish, and thus allow the dollar's gradual rise to resume".
Asked about a so-called flattening of yields in the bond market, which suggest investors are skeptical that this Fed policy-tightening cycle will last much longer, Dudley said pausing policy now could raise the risk of inflation surging and hurting the economy.
The US dollar was up 0.15 per cent at 111.020 yen. United States gold futures for August delivery fell 0.2 percent to $1,254.20 an ounce. It had set a two-week peak of 111.420 on Friday before the USA data-induced retreat. Analysts said polls had favoured Macron and that his victory had been mostly factored in.
The euro was little changed at $1.1204 after gaining about 0.5 per cent on Friday. Prices had firmed overnight on safety buying after a van hit worshippers near a London mosque, adding to concerns about rising attacks.
Sterling has been through a turbulent month, sinking to a near two-month low of $1.2636 on June 9 on the British election shock, but rallying last week as the Bank of England came close to hiking rates after a split vote in its monetary policy committee.