Dollar extends recovery ahead of US consumer spending data

Dollar rose in European trade against a basket of major rivals off eight-month lows for  the second session, after strong US growth and unemployment data.

The gains come ahead of US consumer spending data for December, important for gauging inflation in the country. 

The Dollar Index

The index rose 0.3% to 102.03, with a session-low at 101.68, after rising 0.2% yesterday, the first profit in three days off eight-month lows at 101.50. 

The dollar rose as well after data showed US economy grew in the fourth quarter more than expected, while unemployment claims hit nine-month lows.

Spending Data

Investors await important US consumer spending data for December, important for gauging inflation and the pace of policy tightening this year by the Fed.

US consumer spending is expecting up 5.1% in December, slowing down from 5.5%, while expected up 0.2% on a monthly basis compared to a 0.1% rise in November. 

Strong data will bolster the case for an extended policy tightening and multiple more rates hikes this year, in turn pressuring gold prices.

Will The Dollar Sustain More Losses in 2023? 

If the stream of data continued to show slower inflation and weaker prices in the US, it's expected the Fed will end its cycle of rate hikes, in turn hurting the greenback.