Dollar Rises After Powell’s Comments; Euro Slips Ahead of Eurozone CPI Data
Dollar Index Trades Higher
The U.S. dollar saw a significant surge in early European trade on Thursday, reaching a near seven-week high. The Dollar Index, which monitors the greenback against a basket of six other currencies, traded 0.5% higher at 103.575, close to its highest level since mid-December.
Dollar Boosted by Powell’s Comments
The Federal Reserve kept interest rates unchanged at elevated levels during its latest policy-setting meeting on Wednesday. Fed Chair Powell’s comments about the stickiness in inflation further strengthened the dollar. This led to Goldman Sachs adjusting its expectations of the Fed initiating interest rate cuts from March to May, with a forecast of five 25 basis points rate cuts this year.
Eurozone CPI Data and ECB Expectations
The euro traded 0.2% lower at 1.0791 ahead of the release of the latest eurozone inflation data. Analysts expected the data to show a decrease to 2.7% in January on an annual basis, closer to the European Central Bank’s 2% medium-term target. This could potentially push policymakers towards cutting interest rates.
Bank of England Policy Meeting
The pound traded 0.3% lower at 1.2647 ahead of the Bank of England’s policy meeting later in the session. While the bank was expected to keep rates unchanged, there were hints that the central bank might be moving towards cutting interest rates this year.
Yen Gains and Yuan Under Pressure
In Asia, the yen gained slightly after minutes from the Bank of Japan’s January meeting showed policymakers discussing a move away from its ultra-dovish stance. The yuan remained under pressure as China’s manufacturing sector showed signs of slowing growth and home sales plummeted in January, indicating a worsening property crisis.
