After dropping overnight, the dollar stayed sluggish in Asian trade on Thursday. The US inflation statistics coming in lower than projected caused the interest rate to remain quite low. The Fed will conclude its monetary tightening next month with one final interest rate hike.
The dollar index fell 0.6% overnight and threatened to hit a new two-month low early in the Asian session. The index compares the value of the dollar to six important rival currencies. Remarkably, it managed to recover some of its losses before ascending. By the end of the session, the index was up 0.069% at 101.53. Later, it continued on course to post losses for the seventh consecutive week.
The Consumer Price Index went up by 0.1% last month following February’s 0.4% rise. The decrease in gasoline prices was balanced out by higher rental prices. According to Reuters, economists predicted a CPI growth of 0.2% in March.
Simon Harvey, head of FX analysis at Monex Europe, revealed the data to the public. He said that the US economy’s underlying demand is still substantial enough to support inflation beyond the Fed’s 2% target.
The failure of two regional banks spurred some Federal Reserve policymakers to consider suspending interest rate rises. On the contrary, they ultimately decided that high inflation requires immediate addressing.
The minutes they also included the staff’s predictions of a slight recession later this year.
According to CME FedWatch Tool, the Fed increased interest rates by 25 basis points in March. The markets are pricing in a 70% possibility of a subsequent 25 bps increase in May before lowering rates later in the year.
Consumer spending FX impact analysis
Investor focus will now shift to Friday’s retail results. The purpose is to determine how consumer spending impacts the market.
The euro increased by 0.02% to $1.0991 after reaching a session high of $1.1005 earlier in the day. The currency surged 0.7% higher on Wednesday. Economists expect it to rise for a sixth consecutive week. Besides, traders bet that Europe would continue its path of monetary tightening.
Sterling was last trading at $1.249, up 0.07% after gaining 0.5% on Wednesday. The Japanese yen declined 0.05% to 133.21 per dollar.
After a huge jobs report strengthened the case for another increase in interest rates and drove bond yields higher, the Australian dollar increased 0.33% to $0.671.
Bitcoin rose by 0.41% to $30,091.14 in cryptocurrency. At $1,915.38, Ethereum was up 0.34%.
