Dollar Strengthens as Euro Weakens Before Inflation Data Release
U.S. Dollar Gains Momentum Despite Economic Weakness
The U.S. dollar showed resilience in early European trading despite signs of economic weakness in the country. Traders are eagerly awaiting key inflation data to gauge the Federal Reserve’s stance on interest rate cuts.
By 04:00 ET (09:00 GMT), the Dollar Index, which measures the greenback against other major currencies, was up 0.3% at 104.080.
Anticipation Around U.S. Inflation Figures
Recent data revealing a decline in U.S. durable goods orders and consumer confidence have not significantly impacted the dollar. All eyes are now on the Personal Consumption Expenditures (PCE) index, the Fed’s preferred measure of inflation, scheduled for release on Thursday.
Economists are projecting a 0.4% increase for January, following a 0.2% rise in the previous month. A higher-than-expected reading could delay potential rate cuts by the Fed.
Analysts at ING believe that strong inflation data will continue to support the dollar in the coming days, with market expectations indicating minimal chances of rate cuts at the Fed’s upcoming meetings.
Euro Slips Ahead of Eurozone CPI Data
Meanwhile, the euro traded 0.2% lower at 1.0818 as Europe prepares for its own inflation reports. Germany, France, and Spain are set to release price data ahead of the Eurozone CPI figures on Friday.
Although expectations point to a drop in annual inflation from 2.8% to 2.5% for February, the dollar’s performance remains a dominant factor in the market. The euro is likely to test the 1.0800 level in the near future, according to ING.
Pound Sterling and Other Currencies React to Market Dynamics
Sterling traded 0.4% lower at 1.2635, influenced by a stronger dollar and recent data showing subdued grocery price increases in the UK.
Elsewhere, the New Zealand dollar fell 1.1% to 0.6103 after the Reserve Bank of New Zealand maintained interest rates at 5.5%. The bank’s cautious stance on inflation progress led traders to revise expectations of future rate hikes.
The Japanese yen traded 0.2% higher at 150.80, with market sentiment balanced between early interest rate hikes and potential government interventions. The Chinese yuan remained stable at 7.1993 while awaiting key economic indicators for February.
