The U.S. dollar gains ground at the start of Monday’s trading day in Europe, coming close to five-week highs ahead of this week’s expected U.S. inflation data, which could provide more clarity on the Federal Reserve’s rate hike path.
At 9:05 am (CET), the Dollar Index, which tracks the currency’s performance against a basket of six other major currencies, rose 0.1% to 103.640, not far from Tuesday’s highs of 103.96, its highest level since Jan. 6.
The latest report on the Consumer Price Index of the United States, which is expected to show that monthly rates rose in January, and that annual rates still fell.
Traders appear to favour the dollar in a protectionist way ahead of the release of the CPI report, after revisions to previous data showed consumer prices rose in December rather than falling as previously estimated. On Friday, the University of Michigan survey It also showed a one-year inflation forecast above January’s final figure.
A positive inflation figure could force markets to rethink whether the Federal Reserve will cut interest rates this year, especially after the strong jobs report earlier this month.
The dollar has also benefited from its safe-haven status. The United States shot down a fourth object over the United States over the weekend, raising fears of new geopolitical tensions following the downing of the Chinese spy balloon last week.
On the other hand, the pair USD/JPY a rise of 0.6% to the level of 132.13, and the yen reverses much of Friday’s gains after speculation of academic Kazuo Ueda as the next governor of the Bank of Japan.
Ueda had seen himself as something of an outsider who could change the central bank’s current ultra-loose policy, but this optimism has faded ahead of Tuesday’s announcement after he expressed support for the central bank’s current stance.
The pair EUR/USD It is flat at 1.0675, not far from the five-week lows recorded Monday at 1.0656. The European Commission will publish on Wednesday the quarterly economic report on the Forecasts for the euro zone, and the euro zone will publish on Tuesday its revised data for the GDP.
The pair GBP/USD fell 0.1% to the level of 1.2049, remaining weak after news on Friday that, although the UK narrowly avoided a technical recession in the last quarter of 2022, Gross domestic product It still fell 0.5% month-on-month in December.
The pair USD/CNY It rose 0.3% to 6.8299 as speculation mounted that Chinese authorities would ease monetary policy further to try to generate growth as the country emerges from its strict anti-crisis measures.