The dollar rose on Monday as a holiday in most major Asian markets slowed the start of what could be a busy week, with all eyes on US inflation data for signs of when the Federal Reserve will start cutting rates.
The dollar index, which measures the US currency against six other currencies, rose 0.25% to 104.23, as the market expects the January consumer price index (CPI) to be released on Tuesday, giving the Federal Reserve more confidence that inflation is slowing down.
Marc Chandler, chief market strategist at Bannockburn Global Forex, said that last month’s retail sales, due to be released on Thursday, are expected to decrease slightly to also confirm the slowdown in inflation and curb the rise in yields. the dollar.
The lower CPI and lower retail sales should help boost the Fed’s confidence that inflation will return to its target,” he said, adding that Fed Chair Jerome Powell uses the data to judge the inflation outlook.
The euro was down 0.22% at $1.07595, breaking away from a 10-day high in early trading after seeing a slight rebound last week following a sustained decline in 2024 EUR=EBS.
The euro zone economic growth reading for the fourth quarter on Wednesday could give a new direction.
The pound traded up 0.10% at $1.2613, GBP=D3, and the Japanese yen weakened to 149.43 per dollar, JPY=EBS.
Changing expectations about when and how quickly central banks will cut interest rates while inflation is falling is a key driver in currency markets today.
Strong job data earlier in the month largely ruled out the possibility of a rate cut by the Federal Reserve in March, and markets now see a cut in May as more likely.
Analysts expected US core CPI to be 0.3% month-on-month in January, but up 3.8% year-on-year.