The US dollar is strengthening against a basket of major world currencies today, while investors await the minutes from the Fed’s latest meeting and further macroeconomic data from the US. The market is trying to guess when interest rate cuts might begin. Trading remains weaker due to the closure of some Asian markets during the Lunar New Year celebrations.
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Dollar strengthens, euro and yen weaken slightly
At around 5:45 p.m. CET, the dollar index, which tracks the performance of the dollar against a basket of six major world currencies, rose 0.4 percent to 97.30 points. The euro weakened 0.1 percent against the dollar to $1.1834. The dollar remained almost unchanged against the yen, hovering around 153.50 JPY, while the euro fell 0.1 percent against the yen to 181.65 JPY.
Investors are now focusing their attention on the release of the minutes from the last meeting of the US Federal Reserve’s monetary policy committee and other key data. According to BNY strategist John Velis, three cuts in the base rate are still expected by the end of the year, which is more than current market prices reflect.
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Mixed data from the US and developments in Japan
The latest statistics paint a mixed picture of the US economy. January inflation rose more slowly than expected, and although it remains above the Fed’s 2% target, it indicates some easing of price pressures. There are also signs of a gradual cooling of the labor market, which may open up space for the central bank to ease monetary policy.
In Japan, investors speculated before the elections on higher government spending that could boost inflation, which led to a weakening of the yen and a rise in bond yields at the time. After the elections, however, the mood changed, and the markets began to anticipate the return of some investments to the country and the possible end of the period of extremely low real interest rates. However, some analysts warn that the reaction was too quick and that any return of capital and rise in interest rates will be rather gradual.
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Source: ČTK
