Investing.com - The U.S. dollar surged to a more than two-week high against a basket of major currencies on Friday, as investors digested key U.S. inflation data, while looking ahead to a next week's policy meetings from the Federal Reserve and the Bank of Japan.
The Labor Department said the consumer price index rose 0.2% in August, compared to expectations for a 0.1% gain. Year-over-year, consumer prices increased 1.1%.
Excluding the volatile food and energy categories, so-called core consumer prices climbed 0.3%. The core CPI increased 2.3% in the 12 months through August.
The faster-than-expected growth in U.S. consumer prices helped support the case for a Fed rate hike later this year.
Investors are currently pricing in just a 12% chance of a rate hike at the Fed's September 20-21 meeting, according to Investing.com's Fed Rate Monitor Tool. For December, odds stood at around 55%.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, touched a daily peak of 96.11 in wake of the inflation data, the most since September 1, before ending at 96.06, up almost 0.9% on the day.
Against the euro, the dollar spiked nearly 0.8% to end at 1.1155 by late trade after touching 1.1149, the lowest since September 6. For the week, the pair lost 0.7%.
The pound, meanwhile, plunged to a session low of 1.2998, a level not seen since August 17, before settling at 1.3001, down 1.8% on the day.
Sterling remained under pressure after the Bank of England kept monetary policy on hold on Thursday, but indicated that it could cut interest rates again as soon as November unless the economy picks up.
Elsewhere, the yen's losses remained limited amid fading expectations of drastic easing steps from the Bank of Japan, which, like the Fed, also meets on September 20-21.
Sources familiar with the BOJ's thinking said the central bank will consider making negative interest rates the focus of its future easing by shifting its prime policy target to interest rates from base money.
In the week ahead, investors will be looking to Wednesday’s highly-anticipated Federal Reserve policy meeting.
Market participants will also be awaiting a monetary policy announcement from the Bank of Japan on Wednesday.
Meanwhile, investors will be looking to Friday’s survey data on euro zone business activity for fresh indications on the health of the region’s economy in wake of Britain's vote to exit the European Union.
Outside the G7, traders will be awaiting a monetary policy announcement from the Reserve Bank of New Zealand on Wednesday.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, September 19
Financial markets in Japan will be closed for a national holiday.
Tuesday, September 20
The Reserve Bank of Australia is to publish the minutes of its latest monetary policy meeting, giving investors insight into how officials view the economy and their policy options.
Australia is also to release data on house price inflation.
The U.S. is to report on building permits and housing starts.
Bank of Canada Governor Stephen Poloz is to speak at an event in Quebec.
Wednesday, September 21
The Bank of Japan is to announce its benchmark interest rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision. The announcement is to be followed by a press conference.
The U.K. is to publish data on public sector borrowing.
Canada is to publish a report on wholesales.
The Federal Reserve is to announce its monetary policy decision and publish data on its economic projections for the coming two years.
Thursday, September 22
The Reserve Bank of New Zealand is to announce its benchmark interest rate and publish its rate statement.
Financial markets in Japan will be closed for a national holiday.
The U.S. is to release data on initial jobless claims and existing home sales.
European Central Bank President Mario Draghi is to speak at an event in Frankfurt.
Friday, September 23
The euro zone is to release data on private sector activity.
Canada is to round up the week with data on retail sales and inflation.