Subdued Currency Market Anticipates Upcoming US Economic Data
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Subdued Currency Market Anticipates Upcoming US Economic Data

In the currency market, Thursday was characterized by stability, where the US dollar held its ground against major rivals.

A hushed day on the foreign exchange scene was seen on Thursday, with the dollar holding firm against its major counterparts. Market participants were cautious in their approach as they looked forward to economic data from the world’s largest economy in a bid to gather clues about what lies ahead for Federal Reserve monetary policy.

This comes after Tuesday’s unexpectedly high U.S. Consumer Price Index (CPI) reading which has raised fears over the persistence of inflation and prompted traders to question whether there will be an easing at its June meeting.

However, according to LSEG’s rate probability app., it is still expected by market participants that there is a 65% likelihood of a cut in rates come June which is slightly lower than last week’s 71%. There is currently an 83% chance of a July rate cut.

The focus next week will be either way on the Fed outlook, with markets widely expecting it to leave rates unchanged at this month’s gathering but interested in updated economic projections regarding future policy decisions.

“A few tweaks here and there have been made due to the data. But ultimately I think we’re still looking at three cuts,” Kyle Rodda, senior market analyst at Capital.com said.

Moreover, “a more hawkish tilt next week could reduce that figure to two rate cuts and defer expectations for the first cut until September, effectively painting a bullish picture for the US currency,” according to Mr Rodda.

USD traded little changed at 102.77 versus a basket of six currencies tracked by DXY index.

Later today economists are also expecting US retail sales data release, PPI report and jobless claims all of which are likely going to point toward weak economic indicators further confirming slowdown forecasts.

Federal Reserve Chairman Jerome Powell recently said that his institution was not far away from acquiring enough confidence about starting easing policies again soonest possible time.

With global attention now focused on the Japanese central bank monetary policy committee meeting scheduled for March 18-19, market observers have been fixed at the 147.69 yen level against the dollar for some time.

If major firms’ ongoing wage negotiations yield positive results, sources suggest Japan’s central bank will discuss ending negative rates next week.

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Subdued Currency Market Anticipates Upcoming US Economic Data

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