The dollar tiptoes towards inflation, Fed rate test
SINGAPORE (Reuters) – The dollar found support on Tuesday ahead of U.S. inflation data as investors worried whether the numbers may offer clues about the likely timing of the rate cut and hikes. interest.
Against the euro, the greenback posted a slight gain on Monday to trade at $ 1.1861, with the common currency also weighing down after European Central Bank President Christine Lagarde hinted at a change accommodating rate outlook for Europe.
The other majors were also broadly flat at the start of the Asian session, as markets wait for expected inflation data at 12:30 GMT – leaving the dollar to maintain modest gains against the British pound, Australian and New Zealand dollars and the Japanese yen. [GBP/][AUD/]
Economists polled by Reuters expect the U.S. consumer price index to rise 0.5% from May and 4.9% from a year earlier. Traders believe that failure on either side could move the greenback and the bond market by changing expectations on interest rates.
“My playbook deep in the envelope is that we would need a year-over-year number north of 5.5% to really ignite this market,” said Chris Weston, head of business. research at broker Pepperstone, claiming it could boost bond yields and the dollar.
“We know inflation will be transient – it’s a question of how long it will take for the year-over-year change to come back to 2%,” he said. “A number below 4.5% on the headlines and we should see USD / JPY and USD / CHF under pressure.”
Societe Generale strategist Kit Juckes believes the reaction would actually be stronger if inflation were insufficient, leading investors to bet that the US central bank can maintain an accommodative policy longer, and also designated the yen. as beneficiary.
The Japanese currency settled at 110.31 yen to the dollar on Tuesday, after sliding overnight to move further away from last week’s one-month high of 109.535. The franc was flat at 0.9151 per dollar, close to a one-month high.
The Australian dollar was broadly stable at $ 0.7487, as was the kiwi at $ 0.6991. The British pound held steady at $ 1.3892 amid fears that England would drop COVID-19 restrictions next week, even as cases continue to climb.
The US dollar index, which measures the greenback against a basket of six major currencies, held steady at 92.202, just above its 20-day moving average.
The dollar is dragged down by rate expectations in the United States, and it’s up nearly 2% in the month since the Federal Reserve surprised markets – and canceled huge bets on the dollar’s fall – by projecting rate hikes earlier than expected in 2023.
Longer data bonds also gained ground, with investors seeing cracks emerging in the recovery and taking the Fed’s hawkish turn to mean that it will likely act quickly enough to keep inflation low.
The testimony of Fed Chairman Jerome Powell in Congress on Wednesday will be closely watched for his response to the inflation numbers and his tone on the progress of the recovery.
Prior to that, Fed officials Neel Kashkari, Raphael Bostic and Eric Rosengren will make appearances on Tuesday. [FED/DIARY]
Price of currency offers at 048 GMT
Description RIC Last closure US Pct Change YTD Pct High Bid Low Bid
$ 1.1867 $ 1.1860 + 0.07% -2.86% +1.1869 +1.1859
Dollar / Yen
110.3500 110.3600 -0.03% + 6.82% +110.3650 +110.2950
Euro / yen
130.96 130.88 + 0.06% + 3.18% +130.9600 +130.8700
Dollar / Switzerland
0.9147 0.9151 -0.04% + 3.39% +0.9152 +0.9147
Pound sterling / dollar
1.3881 1.3883 + 0.06% +1.68% +1.3894 +1.3888
1.2450 1.2453 -0.02% -2.22% +1.2457 +1.2447
Australia / Dollar
0.7486 0.7479 + 0.11% -2.67% +0.7490 +0.7477
Dollar / Dollar 0.6991 0.6985 + 0.08% -2.66% +0.6996 +0.6981
Points of Europe
BOJ Tokyo Forex Market Information
Reporting by Tom Westbrook .; Editing by Shri Navaratnam