Yen in Focus as Dollar Slips Ahead of Key US Inflation Data

10 Apr 2024 , 10:54 AM

The dollar steadied on Wednesday as investors focused on an important U.S. inflation report that was scheduled for release later in the day, while the yen stayed just marginally over what the markets saw as the breaking point for Japanese authorities to step in.

U.S. consumer price inflation for March is the primary focus of the market on Wednesday. Traders have been anxiously expecting this data for any clues regarding the Fed's policy stance.

The inflation data comes after a robust jobs report last Friday that exceeded expectations and raised fresh concerns about the timing and magnitude of the central bank's rate reduction this year.

In the face of evidence of the U.S. economy's ongoing resilience, futures traders trimmed their bets to the lowest level since October, cutting rates by about 60 basis points this year, according to LSEG data released on Monday.

According to CME Group's FedWatch tool, before of the data, U.S. interest rate futures increased the likelihood of the first cut happening in June from 51% on Monday to roughly 60%. However, the likelihood of a hold has increased to 40%.

A strong CPI data will probably see markets pricing in a June cut, which would cause the dollar to spike higher.

But even if the report is below forecasts, June bets are likely to stay mostly unchanged as long as obstacles persist, she added, implying the dollar may only slightly decline.

The U.S. dollar index, which compares the value of the dollar to six competitors, remained stable at 104.10.

The Bank of Japan Governor, Kazuo Ueda, said on Tuesday that there may be another interest rate hike later this year in accordance with market predictions, which helped the yen hold onto its 34-year low against the dollar ahead of the data.

As the BOJ head spoke again in the Asian morning, the value of the Japanese yen gained 0.06% to $101.70.

As the European Central Bank meeting on Thursday draws near, the euro remained stable at $1.085575. This week's rate announcement from the ECB is anticipated to remain unchanged, but speculators who are speculating that rate cuts will begin in June will be watching for clues from officials.

At $1.26760, sterling was essentially unchanged.

At its monetary policy meeting on Wednesday, the Reserve Bank of New Zealand is anticipated to maintain rates at 5.5% ahead of the U.S. CPI. For hints about the prognosis, attention will be focused on the tone of the RBNZ's announcement.

The kiwi increased to $0.60655 against the US dollar, up 0.07%. To $0.6630, the Australian dollar increased by 0.05%.

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