Dollar index marginally up

14 May 2024 , 09:05 AM

While the yen was closing in on a two-week low, raising concerns about intervention, the dollar remained stable on Tuesday as investors watched an inflation report that is expected to influence the outlook for U.S. interest rates this week.

Due to recent softer-than-expected U.S. labour market data and remarks from central bankers, investors are trying to predict the direction the Federal Reserve will take this year, which has resulted in a calm currency market this week.

According to CME FedWatch tool, they are now pricing in 42 basis points of easing this year, with a 60% chance of a cut in September, after having to scale back their estimates of rate cuts this year due to sticky inflation.

This week, all eyes will be on the consumer price index on Wednesday, which is predicted by a Reuters poll to indicate that core CPI increased by 0.3% month over month in April, which is less than the 0.4% growth seen in March.

However, the U.S. Producer Price Index is scheduled for release later on Tuesday. Economists will examine it to determine whether inflation is approaching the Federal Reserve’s objective of 2%.

The euro was barely moved, trading at $1.0786, but it has gained 1% against the dollar this month. In contrast, sterling last traded at $1.2554, up about 0.5% so far in May.

The dollar index, which compares the value of the US dollar to six competitors, was last at 105.25.

According to a Reuters poll, almost two thirds of analysts believe that the Fed will lower its benchmark interest rate twice this year, beginning in September. In the previous study, slightly more than half of economists responded.

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