New York Dollar Outlook

By Karen Brettell and Alun John

Dollar Strengthens Against Euro

The dollar made gains against the euro on Thursday as investors awaited key U.S. inflation data and adjusted their positions for month- and quarter-end.

Japanese Yen Weaker, Interventions Loom

The Japanese currency also weakened slightly, trading at 151.38 per dollar, close to its weakest level since 1990. Japan’s monetary officials hinted at intervening to prevent further declines.

Federal Reserve’s Focus on Inflation

Market attention is on the Personal Consumption Expenditures (PCE) data scheduled for release on Friday. With inflation running higher than expected in January and February, traders are eager for clues about the Fed’s rate cut timeline.

Market Response and Fed’s Stance

Helen Given, an FX trader at Monex USA, expects the Fed to maintain its pace of three 25 basis point cuts this year, despite recent inflation spikes. The dollar rallied after Fed Governor Christopher Waller suggested delaying rate cuts, reflecting market uncertainties.

Volatility and Fed Chair’s Speech

With Good Friday closing U.S. markets, increased volatility is anticipated in forex trading. Fed Chair Jerome Powell’s speech on Friday could provide further market guidance.

Mixed Economic Reports

U.S. GDP showed better-than-expected growth in the fourth quarter due to strong consumer spending and business investments. The euro fell to five-week lows at $1.0775, while the pound weakened to $1.262.

Intervention Prospects and Yen Risks

If U.S. inflation data boosts the dollar, it could trigger significant moves in dollar/yen rates. The likelihood of Japanese intervention around the 152 level poses risks for currency markets.

China’s Yuan and Currency Market Dynamics

China’s central bank is closely monitoring the yuan’s fluctuation, setting a wider fixing to prevent sharp declines. The Australian dollar weakened on Waller’s comments and below-expectation retail sales data. Bitcoin rose by 2.91% to $70,848.75.