Dollar Strengthens Ahead of Key US Inflation Data

29 Aug 2024 , 09:41 AM

The dollar held steady on Thursday, recouping some of its previous losses, with traders looking ahead to a major U.S. inflation figure at the end of the week, which could provide additional indications about the future for interest rates.

Friday’s release of the core personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred measure of inflation, caps a week devoid of big market moving data, leaving currencies relatively rangebound.

Nonetheless, the dollar maintained its overnight gains in early Asia trade on Thursday, after rising 0.48% against a basket of major rivals the previous day.

The euro was trading at $1.1130, down from a 13-month high. Sterling increased 0.08% to $1.3201, but was still some way off Tuesday’s record of $1.3269, its highest level since March 2022.

The Australian dollar fell from an eight-month high to $0.6793.

According to the CME FedWatch tool, markets have fully priced in a 25-basis-point rate decrease from the Fed next month, with a 34.5% possibility of an even larger 50-basis-point reduction.

Investors’ predictions on forthcoming US rate cuts were bolstered by Fed Chair Jerome Powell’s statements at Jackson Hole last week that the “time has come” to lower rates, joining a chorus of Fed policymakers who have suggested the same in recent months.

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