Investing.com – The U.S. dollar was lower in European deals on Friday but remained positive for the week after hotter-than-expected U.S. inflation data fueled fears of aggressive signaling from the Federal Reserve next week.
At 06:15 ET (1015 GMT), the dollar index, which tracks the U.S. dollar against a basket of six other currencies, was trading 0.1% lower at 102.950, on track to rise 0.3% for the week. which was its first weekly increase. at four.
Dollar rises amid hot inflation data
The U.S. index rose 0.6% in February, double the 0.3% expected, a further sign that inflation remains a concern for the Federal Reserve after data on Tuesday showed consumer prices rose strongly for a second month consecutively in February.
The meeting is due to take place next week and interest rates are expected to remain unchanged.
But the higher-than-expected inflation data means investors will be closely watching the Fed’s interest rate forecasts, commonly known as scatter plots, and comments from Fed Chairman Jerome Powell for clues about future monetary policy.
Markets are now pricing in a 60% chance of a Fed rate cut in June, up from 74% a week earlier, according to CME’s FedWatch tool.
“Much of the hard data for the US for February has already been published, and the needle has shifted to the hawkish side of the spectrum,” ING analysts said in a note.
“The Fed may still sound relatively optimistic about disinflation next week, but policymakers will inevitably have to pay more attention to data releases over the next couple of months.”
The euro rises after the publication of the French consumer price index
In Europe, it rose 0.2% to 1.0898 after rising more than expected in February, rising 3.0% year-on-year, up 0.8% month-on-month.
Rates remained at a record high of 4% last week, but could begin to cut interest rates in the coming months given slow growth in the region.
A tangible economic recovery in Germany, Europe’s largest economy, is not yet in sight despite positive trends in industrial production, construction and foreign trade at the start of 2024, Germany’s economy ministry said Friday in its monthly report.
“EUR/USD is now trading at a more resilient level and we think it may remain under moderate pressure until the FOMC meeting, which is in line with our view of the dollar,” ING added. “There are some key moving average supports between 1.0840 and 1.0860: in the event of a breakout, we could see the pair test the 1.0800 mark in the coming days.”
ECB chief Christine Lagarde strongly hinted earlier this month that the long-awaited rate cut would likely come at the central bank’s meeting in early June rather than in April.
traded 0.1% higher at 1.2753, with sterling near its lowest level this week ahead of the Bank of England’s policy meeting next week.
Interest rates are expected to remain unchanged next week, but are likely to start cutting later this year to support the struggling economy.
Citigroup now expects the first cuts to occur in June, up from previously expecting cuts to begin in August.
Yen declines ahead of Bank of Japan meeting
In Asia, trade rose 0.3% to 148.72, with the yen set to lose more than 1% this week as speculation grows over next week’s meeting.
The central bank is expected to end its policy of controlling negative interest rates and the yield curve in the coming months, with analysts divided over a decision to be made in March or April.
The Bank of Japan could potentially raise interest rates for the first time in nearly 17 years next week, especially as Japanese inflation remained low in February.
rose 0.1% to 7.1960 as the People’s Bank of China left its medium-term lending rates unchanged, signaling no change to its prime lending rate next week. However, weak data on house prices indicate continued pressure on the Chinese economy.