Written by Steven Dooley and Shier Lee Lim
All eyes on CPI
The US dollar was mostly stronger overnight as markets looked ahead to tonight’s key US inflation release.
The US dollar had fallen last week, hitting a two-month low, after US Federal Reserve chair Jerome Powell said the central bank was still on course to cut interest rates this year.
But markets lifted the US dollar overnight as caution grew ahead of the all-important February inflation release.
Last month, inflation surprised to the upside, driving a sharp response that sent the USD index to three-month highs.
Tonight, markets are looking for headline inflation to remain steady at 3.1% in annual terms.
Aussie slips back into short-term downtrend
As the US dollar rebounded, key markets that have recently benefited from the greenback’s weakness saw a shift in momentum.
Most notably, the AUD/USD dropped back into a short-term downtrend as the pair fell from two-month highs. The AUD/USD fell 0.2%.
Other markets also eased from recent highs, with the EUR/USD down 0.1% and GBP/USD down 0.4%.
In Asia, regional currencies bucked the trend and gained versus the USD. The USD/CNH and USD/SGD both fell 0.1%.
JPY gains as Japan narrowly avoids recession
While other major currencies eased, the Japanese yen continued to accelerate recent gains with the USD/JPY falling to six-week lows overnight.
The JPY was helped by a better-than-expected result from December-quarter Japanese GDP. Importantly, an earlier reading had suggested a negative number that would have seen Japan fall into a technical definition of a recession at the end of 2023.
However, the revised number found December-quarter growth of 0.1%, just enough to allow Japan to avoid reporting a technical recession.
The better number means the Bank of Japan is still on track to lift rates this year and provides support to the JPY.
USD rebounds ahead of CPI
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 11 – 16 March
All times AEDT
*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
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