The dollar rebounded from a one-year low as resiliency in core US retail sales, an increase in short-term inflation expectations, and impressive Wall Street bank earnings boosted market expectations for a May interest rate hike.
Core retail sales, which exclude automobiles, gasoline, construction materials, and culinary services, decreased by only 0.3% in March, according to data released on Friday.
In addition to resilient US economic data, first-quarter 2023 earnings from JPMorgan Chase, Citigroup, and Wells Fargo were strong, dispelling concerns about the March banking crisis.
The US dollar index rose 0.15 percent against a basket of currencies to 101.82, a considerable distance from Friday’s one-year nadir of 100.78.
Friday marked the fifth straight weekly loss for the index.
The euro dropped 0.2% to $1.0965, while the pound fell 0.2% to $1.2387.
The probability that the Federal Reserve will raise interest rates by 25 basis points next month has increased from approximately 69% last week to approximately 81% today.
Short-term inflation expectations have also increased, with the preliminary April reading from the University of Michigan indicating that one-year inflation expectations rose to 4.6% from 3.6% in March.
On Monday, yields on US Treasuries remained elevated in response to Friday’s data releases.