Despite inflation surprise, dollar shows resilience

13 Mar 2024 , 11:12 AM

On Wednesday, the value of the US dollar remained stable relative to a few other currencies as traders assessed the potential impact of higher-than-expected inflation figures on the likelihood of an interest rate reduction at the Federal Reserve’s June meeting.

The consumer price index (CPI) for the United States rose steadily in February, above estimates and pointing to some stickiness in inflation.

Despite rising 0.4% in February as predicted, the CPI’s year-over-year gain of 3.2% was only marginally higher than the 3.1% increase that was anticipated. Core numbers exceeded projections as well.

Because of this, experts are unsure if the Fed will have enough information to support more than a few rate reductions this year.

Nevertheless, according to the CME Group’s FedWatch Tool, market expectations for rate reduction to start at the Fed’s June 11–12 meeting have only slightly decreased to roughly a 67% possibility from 71% earlier in the week.

The dollar index, which compares the value of the US dollar to a group of other currencies, barely moved, closing at 102.91.

The focus now shifts to producer prices, which are expected later this week, and U.S. retail sales, a measure of consumer spending, which has been steady thus far.

The dollar dropped 0.15% to 147.43 against the yen, providing some respite to the Japanese yen, which had suffered its worst decline in a month on Tuesday as a result of Bank of Japan Governor Kazuo Ueda’s somewhat more pessimistic assessment of the country’s economy.

For the first time in thirty years, the largest trade union confederation in the nation has demanded wage increases of 5.85% this year, above the 5% threshold.

Both the euro and the pound, at $1.0925 and $1.2793, were essentially unchanged.

Analysts also anticipate that on Wednesday, the European Central Bank will make public the conclusions of the negotiations around the revision of the Eurosystem’s operational framework, which has resulted in rates remaining at zero or lower and a bank-inundation of liquidity through bond purchases and loans.

Bitcoin increased by 0.58% to $71,478.00, staying below the record high that was reached on Monday.

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