Feb 28 (Reuters) - The dollar index rose marginally on Friday as investors pivoted toward the greenback ahead of expected U.S. tariff implementation next week, while the euro reversed an earlier gain after a press conference between the Ukrainian and U.S. presidents turned contentious. Treasury 2-year yields fell below 4% after data showed U.S. annual inflation easing and consumer spending slowing. Annualized PCE fell 0.1% to 2.5% in January, slightly below the core PCE reading of 2.6%. Federal Reserve Bank of Cleveland President Beth Hammack reckoned the U.S. central bank could keep steadily shrinking its balance sheet through a period of uncertain government finances, while noting she is disinclined to support an interest rate hike even if inflation pressures do not retreat quickly enough. Ukrainian President Volodymyr Zelenskiy and U.S. President Donald Trump clashed on Friday, with Zelenskiy questioning Trump's tilt toward Russia and Trump accusing him of being disrespectful as their differences erupted into a shouting match.
EUR/USD slid 0.2% to a two-week low after the press meeting as hope for a Ukraine peace outcome faded. Downward momentum points to a test of 1.03 price congestion before reaching its year-to-date low of 1.0125. Potential tariffs and an excepted rate cut by the European Central Bank next week will likely sideline euro buyers with the 21-day moving average of 1.0417 acting as near-term resistance. In data, German CPI for February met expectations, rising 2.3% on an annualized basis. GBP/USD fell 0.2%, matching euro losses amid broad gains in the greenback. Further losses would see cable test its 21-day moving average of 1.2541, though overall positioning in the pair remains modest. The S&P composite PMI for February, due Wednesday, should offer a glimpse at the state of the U.K. economy. Bank of England Deputy Governor Dave Ramsden said wage pressures in Britain have raised the risk of inflation holding, though that interest rate cuts did not necessarily need to be slow.
USD/JPY approached 151 before paring gains as Treasury yields retreated. The pair remains subject to bouts of short-covering due to a build up of long positions in the Japanese currency over the past month. Japan PMI on Tuesday and directional moves in the yuan may help guide USD/JPY direction early next week. Strong resistance is seen at the 152 level and 152.43, the 200-day moving average. Bank of Japan Governor Kazuo Ueda and finance minister Katsunobu Kato are slated to speak on Wednesday.
Treasury yields fell 4 to 9 basis points. The 2s-10s curve was up about 2 basis points to +12.3bp.
The S&P 500 slipped 0.13%, dragged lower by tech shares
Oil was down 0.14%, paring a steeper loss after leaders sparred over the Ukraine war.
Gold fell 1.07% and copper dropped 1.38% as the dollar advanced. Heading toward the close: EUR/USD -0.34%, USD/JPY +0.37%, GBP/USD -0.31%, AUD/USD -0.66%, =USD +0.28%, EUR/JPY +0.14%, GBP/JPY +0.19%, AUD/JPY -0.15%.(Editing by Burton Frierson Reporting by Robert Fullem)
