The dollar index, which gauges the U.S. dollar against six counterparts, stood at 104.11 following a turbulent overnight trading session post the inflation report
On Friday, the U.S. dollar remained stable as data revealed that American inflation was persistently high but gradually decreasing. This scenario kept alive the possibility of the Federal Reserve reducing interest rates in June.
Meanwhile, the Japanese yen retreated, approaching the crucial level of 150 per dollar.
Bitcoin’s impressive surge took a pause, resting at $61,622, close to its highest value in over two years and nearing its all-time peak. The cryptocurrency soared by 45% in February, marking its largest monthly gain in more than three years, fuelled by a surge of investment in exchange-traded funds newly approved and introduced in the United States this year.
The dollar index, which gauges the U.S. dollar against six counterparts, stood at 104.11 following a turbulent overnight trading session post the inflation report. The data indicated a rise in U.S. prices in January as expected, with yearly inflation dropping to its lowest point in three years.
The inflation readings can be noisy month to month, strategists at Commonwealth Bank of Australia said in a note.
The data does emphasise the need for the FOMC to be cautious before beginning to normalise interest rates, especially in the current context of a still-tight labour market, they added.
A series of robust economic data and recent reports on persistent inflation prompted traders to reconsider the Federal Reserve’s timeline for initiating interest rate cuts, with June emerging as a probable starting point. Market indicators suggest a 65% likelihood of rate cuts by the Fed in June, as per the CME FedWatch tool, a shift from the beginning of the year when March was initially anticipated for such actions.
Traders are factoring in a reduction of 82 basis points in interest rates this year, aligning closely with the Fed’s projection of a 75-basis-point easing, significantly lower than the 150-basis-point rate cuts anticipated at the start of the year.
U.S. central bankers are overlooking recent data pointing to resurgence in price pressures last month, focusing instead on overall progress in inflation that is likely to shape the direction of interest rate reductions later this year.
I expect things are going to be bumpy, Atlanta Federal Reserve Bank President Raphael Bostic said.
