USD/IDR returns below 14.90 as Indonesian Inflation softens, US Services PMI in focus

• USD/IDR has slipped below 14.87 after a wild move to near 14.90 after softening of Indonesian inflation.
• Indonesian headline and core CPI softened to 4.0% and 2.66% respectively.
• Upbeat US Employment data has made the battle against stubborn inflation extremely complicated.

The USD/IDR pair traded volatile after softening of Indonesian inflation in the Asian session. The asset displayed a wild gyration in an attempt to capture the critical resistance of 15.00 but dropped back to the square near 14.87.

Statistics Indonesia reported headline inflation at 4.0% vs. the estimates of 4.23% and the former release of 4.33%. The monthly headline Consumer Price Index (CPI) figure accelerated by 0.009% at a slower pace in comparison to the street’s estimates of 0.3% and the prior release of 0.33%. Core inflation that strips off the impact of oil and food prices decelerated to 2.66% against the consensus of 2.8% and the former release of 2.83%.

S&P500 futures are carrying nominal losses in the early European session, indicating a minor caution in the overall upbeat market mood. US equities are expected to capture annual highs amid optimism fueled by the clearance of the US debt-ceiling bill in Congress, which has faded fears of a default by the US economy.

Meanwhile, the US Dollar Index (DXY) is displaying a back-and-forth action below 140.20. More upside in the USD Index seems favored as the Federal Reserve (Fed) is expected to raise interest rates further to scale down fears of a rebound in the United States inflation. US Employment data released on Friday has made the battle against stubborn inflation extremely complicated as firms have continued their recruitment process despite higher interest rates by the Fed and tight credit conditions by US regional banks. However, the Unemployment Rate rose to 3.7%.

On Monday, US ISM Services PMI (May) will be keenly watched. The economic data is seen declining to 51.5 vs. the prior release of 51.9. New Orders Index that displays forward demand is seen advancing to 56.5 against the former release of 56.1.