Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Dollar steadies ahead of PCE data; euro drifts higher

Published 02/26/2024, 05:10 PM
Updated 02/26/2024, 05:10 PM
© Reuters.

Investing.com - The U.S. dollar steadied in early European trade Monday, but remained elevated at the start of a week dominated by key inflation releases, including the Federal Reserve’s favorite gauge.

At 04:05 ET (09:05 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded marginally lower at 103.832, having bounced from the 103.43 level seen at the end of last week, the lowest since Feb. 2. 

Dollar awaits key inflation gauge

The dollar recorded its first weekly loss in 2024 last week, but remained within sight of three-month highs, as a chorus of Federal Reserve officials warned that the bank was in no hurry to begin trimming interest rates early, especially as inflation remained sticky. 

PCE price index data, which is the Fed’s preferred inflation gauge, is set to provide more cues on inflation this week, amid expectations for a 0.4% increase on a monthly basis.

Several more Fed officials are also expected to speak this week and likely reiterate the outlook of higher-for-longer interest rates.

“FX has been trapped in a narrow range. US data have been even stronger than our robust expectations, and both markets and Fed speakers have evolved to acknowledge there appears to be no rush to ease policy,” said analysts at Goldman Sachs, in a note dated Feb. 23.

Eurozone inflation looms large

In Europe, EUR/USD traded 0.2% higher at 1.0835, with the euro posting small gains ahead of Friday’s closely watched eurozone inflation data, the last such reading before the upcoming European Central Bank meeting on March 7.

Economists are expecting an annual reading of 2.5% for February, dropping from 2.8% in January, moving back towards the ECB’s 2% target after soaring to double digits in 2022.

Inflation reports from Germany, France and Spain are due on Thursday, ahead of the main release.

“A higher-than-expected inflation report … would likely push the currency back towards pre-payrolls levels (around 1.09) and severely dampen the chance of policy divergence in the first half of the year,” Goldman added.

GBP/USD traded 0.1% lower at 1.2672, with sterling still hit by the drop in U.K. consumer confidence at the end of last week.

U.K. inflation continues to run at levels above the Bank of England’s 2% medium-term target, suggesting the BOE is still likely to lag the Federal Reserve and the European Central Bank when it comes to rate cuts.

Yen still weak ahead of Japanese CPI release

In Asia, USD/JPY traded 0.1% higher to 150.59, with the yen still well above the 150 level and remaining close to three-month lows.

Focus this week was squarely on Japanese consumer price index data for January, due on Tuesday. The reading is expected to show core inflation falling within the Bank of Japan’s 2% annual target range, giving the central bank even less impetus to begin aggressively tightening policy.

USD/CNY edged 0.1% higher to 7.1985, following a stronger-than-expected midpoint fix from the People’s Bank. 

Sentiment towards Chinese markets remained largely on edge before more cues on China’s economy, from purchasing managers index data for February, due later this week.

Concerns over a slowing economic recovery were a key weight on the yuan in recent months, keeping the currency in sight of a three-month low. 

 

 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.