Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Dollar up as market reassesses Fed rate path outlook; retail sales eyed

Published 15/03/2023, 07:28 pm
Updated 15/03/2023, 07:28 pm
© Reuters.

© Reuters.

By Geoffrey Smith 

Investing.com -- The dollar was up in early trading as the market adjusted its view of the likely path for U.S. interest rates again in the wake of February's inflation report on Tuesday. 

The U.S. consumer price index had fallen to 6.0%, but core elements of the report continued to show prices rising at an uncomfortably fast rate, illustrating the Federal Reserve's lack of room for maneuver to respond to last week's banking failures. 

Rate-sensitive two-year bond yields had retraced around two-thirds of their Monday drop in response, as the market settled once again into a consensus that the Fed will raise interest rates by 25 basis points at its meeting next week, not least because failing to do so would likely be interpreted as panicking and as such, unlikely to restore confidence in the U.S. banking sector.

By 04:00 ET (08:00 GMT), the dollar index, which measures the greenback against a basket of advanced economy currencies, was up 0.1 at 103.30, having dropped as low as 103.00 during a four-day plunge.

The CPI report is set to be followed at 08:30 ET Wednesday by data on U.S. retail sales and producer price inflation for February, which will also be influential inputs for the Fed's decision next week.

In Europe, the euro is outperforming after Reuters reported that the European Central Bank is set to stick with its plans to raise its key rates by 50 basis points when it meets on Thursday, with its sources saying that a new set of staff forecasts will still show inflation above its 2% target in 2025.

That point was underlined by the publication of French inflation data for February, which were revised up to show a rise of 1.1% in prices last month, taking the annual rate of inflation in the Eurozone's second-largest economy back up to 7.3%

The euro rose as high as $1.0760, its highest since mid-February, before retracing to be at $1.0735, up 0.1% from late Tuesday. 

Elsewhere in Europe, sterling came under pressure again ahead of the U.K. government's new budget, which is expected to focus on measures to improve labor supply. The U.K. has the highest level of economic inactivity among G7 countries, due largely to long-term absenteeism and a rise in early retirement during the pandemic.

Elsewhere, the offshore yuan edged down after a mixed set of data for industrial production, retail sales and fixed asset investment in February. 

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.