Dollar Dips Ahead of Key U.S. Inflation Data Release
U.S. dollar takes a slight dip on Friday as investors await crucial inflation data release, impacting sentiments ahead of the Federal Reserve meeting next week.
Dollar Index Shows Minor Decline
At 04:55 ET (08:55 GMT), the Dollar Index, tracking the greenback against a basket of other currencies, traded 0.1% lower at 105.395, down from Thursday’s peak of 106.00.
Anticipation for PCE Data
Recent data revealed a 1.6% growth rate in the U.S. economy for the January-March period, lower than the expected 2.4% rate. However, core personal consumption expenditures price index showed a 3.7% rise, exceeding forecasts of 3.4%.
Fed officials’ concerns about inflation have tempered expectations for an early interest rate cut, prompting the market to adjust its projections.
All eyes are now on the upcoming release of the data for March, considered the Fed’s primary inflation gauge.
Analysts at ING noted, “The main factors influencing the FX market point to a stronger dollar, including higher Treasury yields, favorable swap differentials, and declining equities.”
Eurozone Consumer Sentiments and Inflation
In Europe, the euro rose 0.2% to 1.0746, supported by the weakening dollar. Eurozone consumers’ inflation expectations for the next 12 months stood at 3.0%, slightly below the previous month’s 3.1% projection.
However, expectations for inflation three years ahead held steady at 2.5%, exceeding the European Central Bank’s 2.0% target.
The ECB plans to decrease interest rates in June amid challenges posed by rising energy costs, persistent services inflation, and geopolitical tensions.
Additionally, the pound rose 0.2% to 1.2532, benefiting from the dollar’s recent weakness as per ING analysts.
USD/JPY Reaches New Highs
In Asia, the dollar rose 0.6% to 156.58, hitting new 34-year highs after the BOJ maintained interest rates following a historic hike in March.
Weaker-than-expected inflation data from Tokyo further fueled doubts regarding a hawkish BOJ stance.
Elsewhere, the Australian dollar rose 0.5% to 0.6552, supported by robust inflation data, adding to expectations of prolonged higher rates in the country.
