Dollar Stabilizes, Treasury Yields Rise, Sterling Gains – Unexpected CPI Data

Dollar House

In early European trade on Wednesday, the U.S. Dollar stabilized as traders tried to determine the likely direction of Federal Reserve’s monetary policies by analyzing economic data and policy maker comments.

At 02:00 (06:30 GMT), the Dollar Index which tracks the greenback versus a basket six other currencies traded 0.1% higher, at 101.510. This was a rebound after the previous session’s 0.4% decline.

Federal Reserve Bank of St. Louis president James Bullard stated in an interview on Tuesday with Reuters that he favored continuing interest rate hikes to combat persistent Inflation. He could potentially raise the Fed Funds Rate to a range of between 5.5% and 5.75%.

His colleague Raphael Bostic, Atlanta Federal Reserve President, suggested that one more rate increase of 25 basis points in the target range of 5.00%-5.25 % should be sufficient for the Fed.

U.S. The yields on two-year Treasury bonds reached a near-month-high of 4,231% overnight and remained at around 4.21% during early European trading. This suggests that Bullard’s remarks resonated more throughout the markets.

Federal Reserve officials are closely watching economic data ahead of their next meeting, which is scheduled for May. The release of Beige Book could give investors more information about the economic conditions in the United States.

The dollar was lower on Tuesday, after data revealed that the Chinese GDP grew 4.5% year-on-year in the first three months of the year, an acceleration from the 2.9% growth recorded the previous quarter, which boosted risk sentiment

The losses in the Chinese economy were relatively small, however, because the growth of 4.5% in the GDP year-on-year was always from a low starting point. Secondly, the industrial data showed a softening, which could indicate that the manufacturing sector is struggling due to weak external demand.

The EUR/USD exchange rate fell by 0.1%, to 1,0966, following a 0.4% increase the previous day, in anticipation of the release the final March inflation figures for the Euro zone.

The CPI will rise by 0.9% in March. This represents an increase of 6.9% over the past year, down from the 8.5% in February.

The core CPI is expected to rise 5.7% over the past year, a higher rate than the 5.6% seen in the previous month, indicating that the European Central Bank may continue raising interest rates.

The GBP/USD exchange rate rose by 0.1%, to 1.2431. Data released earlier on Wednesday showed that the annual price increases slowed down less than anticipated in March and were still extremely high at 10.1%.

Agree or not agree ? Let your opinion here with a comment !

Your email address will not be published. Required fields are marked *