The dollar experienced a surge against the euro and yen as investors positioned themselves for impending U.S. and European inflation data scheduled for Thursday. This movement in the dollar was accompanied by Bitcoin reaching its highest point in over two years, benefiting from robust overall market liquidity.
Brad Bechtel, Global Head of FX at Jefferies in New York, noted increased foreign exchange volatility on Wednesday, potentially attributed to hedging in anticipation of the inflation data and month-end portfolio rebalancing.
The implied volatility for three-month options on the euro against the dollar reached its highest level since February 15, signaling increased market activity and attention to potential economic indicators.
Investors are closely watching data releases for further insight into when the Federal Reserve might begin interest rate cuts. Expectations have been pushed to June, influenced by strong economic growth, persistent inflation, and more hawkish commentary from Fed officials.
Thursday’s release of the U.S. Personal Consumption Expenditures data is anticipated to show a 0.3% rise in headline prices for January, with an annual gain of 2.4%. The core index is expected to rise by 0.4% for the month and 2.8% on the year.
Alongside the U.S. data, consumer price data for Germany, France, and Spain is also expected on Thursday, ahead of broader euro area figures on Friday.
The dollar index rose by 0.12% to 103.96, while the euro dipped 0.11% to $1.0832. The yen weakened against the dollar, approaching the 150.88 level reached on February 13.
Bitcoin, benefiting from favorable market conditions, surpassed $60,000 for the first time since November 2021, coming close to $64,000. The surge was attributed to the launch of new U.S. spot bitcoin exchange-traded products.
Bitcoin closed the day up 6.5% at $60,334, marking a significant milestone in its recent price trajectory.