Dollar sees choppy trading after Fed signals hawkish shift

8 Feb 2024 , 08:42 AM

As traders processed fewer dovish comments made by policymakers overnight and anticipated new economic data from the US, the US dollar was trading in a narrow range on Thursday.

Amid worries about deflation in the second-largest economy in the world, attention was also focused on inflation figures from China throughout the Asian morning.

Several Fed speakers over night offered a variety of justifications for not feeling particularly urgent to begin relaxing policy in the US anytime soon or to act swiftly once they do.

FedWatch Tool data from CME Group indicates that the market is pricing in an 18.5% chance that the Fed would start reducing rates in March, a considerable decrease from the beginning of the year. Traders estimate that a 25 basis point drop in May is about 60% certain.

Motivated by Friday’s explosive U.S. jobs statistics, the greenback fell overnight after jumping over its 100-day moving average on Monday and Tuesday for the first time since late November.

The U.S. currency’s value relative to six major counterparts is measured by the dollar index, which was last trading at 104.00.

The euro was up 0.06% to $1.0777 per dollar on Tuesday, maintaining its position above the lowest since Nov. 14 at $1.0722.

At $1.26305, sterling was mostly unchanged.

In contrast, the Japanese yen was unchanged against the US dollar at 148.18.

In other parts of Asia, consumer prices in China continued to fall in January for a fourth month, and producer prices also declined, highlighting the deflationary dangers that the world’s second-biggest economy faces as it attempts to establish a sustainable recovery.

According to data, the consumer price index (CPI) increased 0.3% month over month in January but decreased 0.8% from a year earlier.

According to Reuters polled economists, there would be a 0.4% monthly rise and a 0.5% annual decline.

In January, the producer pricing index (PPI) fell 2.5% from the same month last year, as opposed to the 2.6% decline predicted in the Reuters survey.

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