Dollar remains steady

12 Jun 2024 , 09:49 AM

As market participants anticipated important U.S. inflation data and the Federal Reserve’s updated interest rate estimates, which are expected later in the day, the dollar steadied on Wednesday after reaching a four-week high against peer currencies overnight.

The markets received an updated assessment of China’s economic situation before to those pivotal events.

Data revealed that producer price decreases marginally reduced and consumer inflation increased steadily in May, supporting the notion that government efforts to support the economy were beginning to pay off.

The offshore Chinese yuan strengthened to 7.2697 against the US dollar.

The dollar index, which compares the value of the US dollar to a few other significant competitors, was little changed at 105.26 overnight after hitting its highest level since May 14 at 105.46.

The possibility of sticky inflation and robust growth, as suggested by Friday’s better-than-expected jobs data, has helped the U.S. dollar strengthen and lessen the likelihood that the central bank will lower interest rates in the near future.

According to the CME FedWatch tool, markets are pricing in a about 56% possibility of a cut in September, down from 77.8% one week ago.

Investors will have a chance to assess the inflation situation when U.S. Consumer Price Index numbers are released at 1830 GMT on Wednesday, just hours before the Fed concludes its two-day policy meeting.

According to Reuters polled economists, core price inflation will stay constant at 0.3% for the entire month, but headline consumer price inflation is expected to decline to 0.1% from 0.3% last month.

In the meanwhile, it is generally believed that the Fed will keep interest rates at 5.25% to 5.5%. As a result, market participants will be watching Chair Jerome Powell’s press conference and the updated economic estimates that policymakers have been calling the “dot plot” for indications about when rate reduction may start.

The euro remained steady at $1.0740, avoiding its lowest point since May 2 on Tuesday, when it was $1.07195.

The value of sterling stayed at $1.27395. The April GDP estimates for the UK are expected later on Wednesday.

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