🔴 Exclusive webinar: The Secrets of ProPicks AI Success Revealed + November’s List FREEWatch Now

Dollar shows resilience, euro higher ahead of CPI release

Published 01-03-2024, 02:34 pm
© Reuters.
EUR/USD
-
GBP/USD
-
USD/JPY
-
USD/CNY
-
DX
-

Investing.com - The U.S. dollar showed resilience in early European trade Friday, retaining the majority of overnight gains after the release of eagerly-anticipated U.S. inflation data, while the euro showed some strength.

At 04:00 ET (09:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded largely unchanged at 104.107, after a volatile overnight session. 

U.S. dollar resilient

The PCE price index - the Federal Reserve’s preferred inflation gauge - cooled in January, according to data released Thursday, but remained well above the central bank’s annual inflation target. 

This followed a string of strong U.S. economic numbers which pointed to persistent price pressures, resulting in the markets pricing out the chances of a rate cut as early as this month.

June is now seen as the likely starting point for the Fed’s rate cutting cycle, with traders seeing around 75 bps of easing this year.

“The notion of resilient US inflation and activity data has now been fully digested,” analysts at ING said, in a note. “Investors are comfortable with three 25bp cuts priced in by December as there is just not enough data evidence to turn more dovish now. Similarly, a rate cut before June seems unlikely. All this is translating into a resilient dollar.”

Euro edges higher ahead of eurozone CPI

In Europe, EUR/USD traded 0.1% higher at 1.0813, ahead of the release of the eurozone CPI figure for February, which is expected to show another slowdown of inflation in the region.

Data released on Thursday showed that consumer prices declined slower than expected in France but faster than expected in Germany. Economists are expecting an annual reading of 2.5% for February, dropping from 2.8% in January.

“A deviation from expectations could trigger short-term swings in eurozone rates and the euro, but should not really have a big impact on the narrative that Christine Lagarde and the Governing Council look set to reiterate next week,” added ING.

The European Central Bank meets next week, and while no policy change is expected, the bank could hint at rate cuts later in the year.

GBP/USD traded 0.1% higher at 1.2635, after data from mortgage lender Nationwide showed that British house prices rose in February in annual terms for the first time in more than a year.

House prices were 1.2% higher than in February 2023, the first annual increase since January last year, Nationwide said.

Inflation is retreating in the U.K., but remains at a higher level than in Europe and the U.S., suggesting the Bank of England will be comparatively late to the rate-cutting party. 

Yuan hit by weak Chinese PMI release

In Asia, USD/CNY traded 0.2% higher at 7.1989, with the yuan weaker after official PMI data showed China’s manufacturing sector shrank for a fifth straight month in February. 

The weak reading largely offset data showing some improvement in non-manufacturing activity, although this increase was largely due to higher consumer spending during the Lunar New Year holiday- a trend which may peter out in the coming months.

USD/JPY traded 0.5% higher to 150.66, with the yen relinquishing all of its gains on Thursday, trading back above the 150 level as the prospect of higher for longer U.S. rates largely overshadowed any early rate hikes by the Bank of Japan.

 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.