Dollar Up Ahead of Inflation Data, Fed Update

11 Jun 2024 , 08:55 AM

As traders prepared for significant U.S. inflation data and new Federal Reserve interest rate estimates the following day, the dollar remained close to a one-month high against the euro and surged to a one-week high against the yen on Tuesday.

Higher Treasury yields helped the US dollar following unexpectedly positive domestic jobs report at the end of last week, which caused a sharp reduction in bets on this year’s Fed rate cuts.

While investors anticipate a reduction in the central bank’s monthly government bond purchases as early as this meeting, the Bank of Japan determines policy on Friday. However, widening yield differentials with the U.S. have kept the yen from rising.

In the early hours of the Asian day, the dollar gained 0.13% to reach its highest level since June 3 at 157.25 yen.

After hitting a record low of $1.0733 on Monday, when the far-right’s victories in the European Parliament elections prompted French President Emmanuel Macron to call for an early election, the euro remained flat at $1.07635.

The US dollar index, which compares the value of the dollar to the euro, yen, and four other significant rival currencies, barely moved, closing at 105.16 on Monday after hitting 105.39 on Monday for the first time since May 14.

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

The Fed will update its economic and interest rate estimates during its two-day policy meeting, which ends on Wednesday. No changes to policy are anticipated.

The median estimate at the time of the most recent announcement in March was for three quarter-point drops this year, but officials have since become much more pessimistic.

As of right now, traders anticipate decreases of just 37 basis points by December.

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