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Investing.com – USD stabilizes in early European trade Thursday, gains ahead of key U.S. inflation data release that could provide further clues about when the Federal Reserve will start cutting interest rates in 2024 Most of the time was maintained.
As of 4:20 a.m. ET (9:20 p.m. Japan time), the dollar index against a basket of six other currencies was trading flat at 102.090, but still 1% higher than since early January.
US consumer price index rises significantly
The dollar remained in demand for much of the new year as traders scaled back bets that the Bank of Japan would cut interest rates early.
However, futures markets show a rate cut of about 140 basis points this year is still priced in, with about a two-thirds chance of starting as early as March.
The release of the December US consumer price index is likely to boost sentiment until the next policy meeting at the end of the month.
Prices are expected to rise 0.2% for the month and 3.2% annually, up slightly from 3.1% last month. However, the figure, which excludes volatile food and energy prices, is expected to fall to 3.8% annually, the lowest level since mid-2021.
“While the consensus CPI print may not show significant dollar upside (indeed, there is some downside risk given that parts of the market are probably positioned on strong numbers), we We believe we will see a combination of a slight and prolonged decline in core inflation.'' ING analysts said in a note that the labor squeeze will cause the Fed to pull back on rate cuts more forcefully. Stated.
Euro Spain and Italy data balance
In Europe, it traded little changed at 1.0974, helped by data showing it rose 0.8% on an annualized basis in November, recovering from a revised 1.4% decline the previous month.
In contrast, comparable data showed a 1.5% month-on-month drop in November, more than the expected 0.2% drop, as the eurozone as a whole struggles to achieve any form of growth. It was much weaker.
ECB Vice-President Luis Deguindos said on Wednesday: “Weak indicators point to another contraction in the economy in December, confirming the possibility of a technical recession in the second half of 2023 and a weak short-term outlook. “
Sterling rose 0.1% to £1.2756 after the Bank of England governor declined to comment on the possibility of a rate cut in his testimony to the Treasury Select Committee on Wednesday.
“Targeting price stability and inflation is consistent with and underpins financial stability. Therefore, from a financial stability perspective, it is clearly important to get inflation back on target.” said Mr. Bailey.
Yen approaches one-month low
Elsewhere, the yen weakened again on growing confidence that the Bank of Japan will delay a shift away from ultra-dovish policy, falling 0.1% to 145.53 yen as the currency hovered near a one-month low. Traded.
The currency fell 0.1% to 7.1628 yuan, marking a slight recovery for the yuan after a weak start to 2024. Sentiment toward China remains weak amid a slowing economic recovery, with inflation and trade data due on Friday expected to show little improvement.
