The euro ended the week almost exactly where it started, while the dollar weakened slightly against most major currencies, as traders held back ahead of new inflation figures due next week.
The dollar lost about 0.3 percent against the euro over five sessions, a modest move that analysts put down to slightly softer economic data and lower expectations for further interest rate rises abroad. Trading volumes were thin for most of the week.
Quiet markets, cautious traders
Dealers in Riverton described the mood as cautious rather than nervous. Most large investors are waiting for the national statistics office to publish its monthly inflation estimate, which will shape the central bank’s decision at its meeting later this month.
Nobody wants to take a big position before the inflation number. The market is basically holding its breath.
Clara Novak, chief economist at Northvale Savings Bank
Inflation slowed to 2.6 percent last month, its lowest level in more than a year, helped by cheaper fuel and stable food prices. If the next figure confirms that trend, economists expect the central bank to keep its main rate unchanged rather than cut it straight away.
What it means for households
For most households the week’s moves are too small to notice. Travelers changing money for trips outside the euro area will get slightly more dollars for their euros than a month ago, but the difference on a typical holiday budget is only a few euros.
Exporters are paying closer attention. Manufacturers in Northvale, many of which sell machinery and parts to buyers who pay in dollars, say a weaker dollar slowly eats into their margins.
A few tenths of a percent do not hurt us this week. Six months of it would.
Marko Lindgren, finance director at a Northvale machine-tool maker
Importers of fuel and raw materials see the opposite effect, as a softer dollar makes their purchases a little cheaper.
The week ahead
Besides the inflation estimate, markets will watch retail sales data and a speech by the central bank governor on Thursday. Analysts at several banks expect the euro to stay within a narrow range unless the inflation figure brings a surprise.
Gold prices, which often rise when the dollar weakens, edged up by about 1 percent over the week.
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