The euro rose against the U.S. dollar on Friday after strong euro zone inflation figures, while the dollar jumped against the yen after U.S. wages data suggested the Federal Reserve would still hike interest rates two more times this year.
Official flash estimates put euro zone inflation at 1.9 percent in the first quarter, on the verge of crossing over the European Central Bank’s target of below but close to two percent, and above estimates for a rise of 1.8 percent. According to standard EU measures, in Italy it was two percent.
That helped drive the euro as high as $1.0947, just below a 5-1/2-month high of $1.0950 struck earlier in the week.
Analysts said the latest inflation figures could prompt the ECB to take a more hawkish bent in its June statements by either upgrading its assessment of the European economy or suggesting less need for stimulus.
“The ECB will certainly have to build inflation into their rhetoric at the June meeting, given the data,” said Jason Leinwand, founder and chief executive of FirstLine FX in Randolph, New Jersey.
The dollar rose as much as 0.4 percent against the yen to a session high of 111.71 yen, just below a nearly four-week high of 111.77 touched April 26, after U.S. Labor Department data showed private wages and salaries accelerated 0.9 percent in the first quarter. That marked the largest increase in ten years.
The data suggested firming inflation and helped boost the dollar even as the Commerce Department said U.S. gross domestic product increased at a 0.7 percent annual rate. That was the weakest performance since the first quarter of 2014.
“The GDP data wont alter the view that the Fed may raise rates in June and then ultimately again in September,” said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange Inc in Washington.
The dollar was last up 0.2 percent against the yen at 111.51 yen. The dollar index, which measures the greenback against a basket of six major rivals, was last mostly flat at 99.102.
The greenback hit C$1.3697, its highest level against the Canadian dollar since late Feb. 2016, on lingering concern over U.S. President Donald Trump’s dissatisfaction with the North American Free Trade Agreement (NAFTA), a U.S., Mexico and Canada trade pact.