US consumer spending flat for second month in March

Daniel Acker | Bloomberg | Getty Images

Daniel Acker | Bloomberg | Getty Images

The dollar edged lower against the euro on Monday after weak USA factory and inflation. The economy grew at a 0.7 percent rate in the first quarter, the worst performance in three years.

A key inflation gauge closely watched by the Federal Reserve showed a 0.2 per cent decline in March while core inflation, which excludes food and energy, fell 0.1 per cent, the first decline since September 2001. In the 12 months through March the PCE price index increased 1.8 percent after rising 2.1 percent in February.

The Institute for Supply Management (ISM) said its index of national factory activity dropped to a four-month low of 54.8 in April from a reading of 57.2 in March. The dollar was last 0.2 percent higher against the yen at 111.77 yen JPY= and near a one-month high of 111.92 touched earlier in the afternoon.

A majority of the FOMC expect underlying inflation to edge towards the 2% target, although there are still important uncertainties while a dovish minority remain concerned that underlying inflation pressures are still too weak to push inflation higher.

GBP/USD is supported in the range of 1.2857 levels and now trading at 1.2893 levels.

The core PCE is the Federal Reserve's preferred inflation measure. He also cited USA first-quarter gross domestic product growth data last week that showed the US economy grew at its weakest pace in three years. It hit session high at 0.7540 and made session lows at 0.7522 levels. The median forecast of economists in a Bloomberg survey called for a 0.2 percent advance.

With price pressures subsiding, inflation-adjusted consumer spending, which accounts for more than two-thirds of USA economic activity, increased 0.3 percent in March, ending two straight months of decline.

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The euro was last up just 0.1 percent against the dollar at $1.0901, after touching a session high of $1.0923 EUR= shortly after the data. It posted a loss of 1.8 percent in April, the largest monthly loss this year.

The longer-term trends also showed a slowdown. Prices for USA government bonds were trading lower, while the dollar was marginally lower. Oil slipped more than 1 percent as rising output in Libya and increased US drilling countered OPEC-led production cuts.

Euro short positioning eased in the week ended April 25, according to calculations by Reuters and Commodity Futures Trading Commission data released on Friday, after independent centrist Emmanuel Macron came out ahead of anti-European Union rightist Marine Le Pen in the first round of the French election last weekend. Last week, the loonie fell 1.1 percent pressured by an uncertain outlook for the North American Free Trade Agreement and mortgage market concerns.

In recent trading, the Dow Jones Industrial Average fell slightly.

Officials have indicated they believe the economy's first-quarter weakness was a blip and that economic growth will rebound this spring.

The yield for the 10-year Treasury note TMUBMUSD10Y, +0.08% rose a 0.5 basis point to 2.290%.

The central bank is due to consider monetary policy Tuesday and Wednesday and is not expected to adjust interest rates at this meeting. USA stocks were little changed. A reading above 50 indicates an expansion in manufacturing, which accounts for about 12 percent of the US economy.