Dollar drops to 1-week low amid mixed Fed comments, US CPI in focus

The USD index dropped to 97.28 on Thursday, its lowest since 8 April, before ending down 0.67% on the day at 97.67. The gauge has moved down from the previous close on Friday in Asia to 97.51. So far this week, the index was down 1.8%.

Meanwhile, EUR/USD rallied to an eight-day high of 1.0819 on Thursday from Wednesday's close of 1.0684 and the pair has been hovering around the high on Friday.

Data from the US on Thursday were mixed but with a dovish bias. The initial jobless claims for the week to 10 April rose to 294,000 from previous week's 282,000 against the consensus of a drop to 280,000. Also, the 3 April week's number was revised up by 1,000.

The housing markets statistics released on Thursday was also not in favour of the world's largest economy. Housing starts fell to 926,000 in March from 908,000 in February while the consensus was for a rise to 1.04 million. The number of building permits too declined, to 1.039 million from 1.102 million, trailing expectations of 1.080 million.

The continuing jobless claims for the 3 April week was better than expected at 2.268 million from 2.312 million in February compared to the market consensus of 2.312 million. Similarly, the Philadelphia Fed index increased to 7.5 for April from 5.0 in March beating analysts' forecast of 6.0.

In addition, four Fed officials were on tape on Thursday including the vice chairman Stanley Fisher and Boston Fed president Eric Rosengren, Atlanta Fed president Dennis Lockhart and Cleveland Fed's Loretta Mester.

Fischer emphasised the determining role of data on the exact timing of a rate hike at some point later this year. But he gave no sense of when he thought that would be, Reuters reported.

Rosengren said the US economy is not yet ready for higher short-term rates as it has not met the current inflation and job market performance goals.

"I do not think that either condition has been met" to support moving short-term rates off of their current near-zero levels, Rosengren stated in the text of a speech delivered in London.

"Although there has been noticeable improvement in the labor market over the past few years, since March the indicators have been a bit mixed, and inflation remains stubbornly below our target of 2%," he added.

Lockhart said data has been murky so he would prefer to wait before a hike in the Fed rates.

Mester was the only one among Thursday's speakers who sounded hawkish. She said a June rate hike will be supported if the incoming GDP data comes in as she expected it would be. According to her, the US would rebound after the Q1 weakness and grow to 3% expansion over the next three quarters.

The FOMC member, however, could not prevent the dollar ending weaker on Thursday.

The market is now waiting for the US consumer price inflation numbers scheduled for later in the day. The year-on-year headline inflation rate is forecast to repeat the February number of 0% in March while the core measure is seen at 1.7%, that too unchanged from the previous month.