On Friday, the U.S. dollar maintained its stability as traders assessed the impact of unexpectedly robust economic growth data on the Federal Reserve’s rate trajectory. Market participants eagerly awaited a key inflation indicator later in the day for further insights.
Meanwhile, the euro found itself on the defensive as traders increased bets on an April rate cut following the European Central Bank’s (ECB) recent monetary policy meeting on Thursday.
In the United States, official data on the advance GDP estimate revealed that the gross domestic product in the last quarter surged at a 3.3% annualized rate, surpassing the consensus forecast of 2% growth. Additionally, the data indicated a further easing of inflation pressures..
The dollar index, gauging the greenback against a basket of major currencies, hovered around 103.53 during Asian trading hours, following a 0.2% increase overnight.
Conversely, the benchmark U.S. 10-year Treasury yield slid to 4.11%. Chanana added, “Pressure on yields and the dollar could intensify if December PCE (personal consumption expenditures) comes in softer than expectations today.”
Year-to-date, the dollar has advanced approximately 2%, reflecting a moderation in market expectations compared to late last year. The CME FedWatch tool indicates a 50% probability of a rate cut in March, down from 75.6% a month ago.
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The euro was last seen at $1.08385, down from the six-week high of $1.08215 reached on Thursday. The ECB, as anticipated, maintained its policy stance in the previous day’s meeting. However, traders have increased speculation about an interest rate cut in April, perceiving a growing comfort among policymakers with the inflation outlook.
The Bank of England’s announcement on interest rates next Thursday kept sterling down 0.10% on the day, trading around $1.2698.
In other regions, the yen fluctuated around the upper 147 range against the dollar, ending at 147.77. Data on Friday disclosed that core inflation in Tokyo slowed to 1.6% in January from a year earlier, falling below the central bank’s 2% target.
Looking ahead, the focus will be on whether wages will rise enough to support consumption and aid Japan in sustainably achieving the Bank of Japan’s 2% inflation target.
In the Cryptocurrency market, bitcoin saw a 0.53% increase, reaching $40,112.00.
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