In European trading, the U.S. dollar saw a modest uptick, maintaining its recent robustness as investors awaited further indications on U.S. interest rate movements through upcoming producer inflation and retail sales data releases.
At 06:00 ET (10:00 GMT), the Dollar Index, gauging the dollar’s performance against a basket of six other major currencies, registered a 0.1% increase, reaching 102.490.
Dollar Advances Prior to U.S. PPI Release
Earlier this week, the dollar received a boost following the release of a robust U.S. consumer price index, fueling expectations that the Federal Reserve might adopt a cautious approach towards interest rate adjustments.
Over the past month, the U.S. currency experienced a 1.7% decline, partially attributed to dovish remarks from Fed Chairman Jerome Powell during his recent Congressional testimony. However, despite this decline, the dollar remains up by approximately 1.5% for the year, supported by resilient U.S. economic data and indications of lingering inflation pressures highlighted in Tuesday’s CPI release.
Focus now shifts to the upcoming release of the producer price index for February and retail sales data for the same month, which are anticipated to provide further insights into the Fed’s policy outlook ahead of next week’s policy-setting meeting.
Analysts at ING remarked, “PPI will be closely watched as investors seek affirmation that inflationary pressures are not as intense as indicated by the CPI report. The consensus points to a 0.2% month-on-month increase for core PPI, though expectations may be higher following the CPI data.”
Euro Exhibits Limited Volatility; ECB Rate Cut Expectations Mount
In Europe, EUR/USD retreated by 0.1% to 1.0942, as the absence of significant economic data from the eurozone contributed to subdued market activity.
While the European Central Bank (ECB) maintained interest rates at record levels last week, market participants anticipate a potential rate cut in the near term amid sluggish economic growth, particularly in Germany.
French central bank head and ECB policymaker Francois Villeroy de Galhau suggested that the ECB could initiate rate cuts as early as spring, which he defined as between April and June.
Earlier indications from ECB chief Christine Lagarde also suggested a likelihood of a rate cut at the central bank’s meeting in early June rather than in April.
GBP/USD Inches Upward; BOE Rate Decision Awaited
GBP/USD climbed by 0.2% to 1.2816, with expectations of the Bank of England maintaining interest rates unchanged during its upcoming meeting next week, as inflation continues to hover above the central bank’s 2% medium-term target.
BOJ Meeting Draws Attention in Asia
In Asia, USD/JPY advanced by 0.1% to 147.82, as the yen retraced some recent gains ahead of the Bank of Japan’s meeting next week.
Reports suggest that the central bank is nearing the end of its ultra-easy monetary policy, particularly after a positive revision in GDP data showed Japan avoiding a technical recession in the fourth quarter.
USD/CNY Sees Modest Uptick; AUD/USD Rises on Commodity Strength
USD/CNY edged 0.1% higher to 7.1902 amid lingering concerns over China’s economic recovery, while AUD/USD climbed by 0.1% to 0.6624, buoyed by robust commodity prices, propelling the Aussie dollar to a nearly two-month high in recent trading sessions.