Dollar on track for strong monthly growth ahead of Fed decision By Investing.com

Investing.com – The US dollar gained in early trading in Europe on Wednesday, on track for its biggest monthly gain since September, while the euro slipped after weak inflation data.

At 10:45 a.m. ET, the exchange, which tracks the currency against six other major currencies, rose 0.1% to 103.352, putting it on track to post a gain of more than 2% this month.

Dollar on track to post strong monthly gain

The dollar has been in demand this month as traders have lowered their expectations for when the US will start cutting interest rates following strong US economic data and resistance from central bankers.

The greenback also benefited from rising geopolitical tensions in the Middle East, which have hit risk-on sentiment amid fears of wider regional conflict.

The US central bank is expected to keep interest rates unchanged, so attention will focus on Fed Chairman Jerome Powell’s post-meeting press conference to see if he signals that a cut is coming.

“Considering the data released in the United States, the latest of which is the JOLTS survey for December, which shows an increase in job opportunities, tonight’s FOMC announcement is expected to boost the market to a higher price than “There seems to be no reason to cut rates by the current 130 basis points for this year,” ING (AS:) analysts said in a note. “This should be a neutral/positive development for the dollar.”

This Wednesday we will know more labor data, such as the January report, before the weekly report on Thursday and the monthly report on Friday.

Euro falls after weak inflation data

In Europe, the pair fell 0.1% to 1.0829 after regional consumer price data from Germany and France pointed to a decline in inflation, raising the possibility that the Federal Reserve will cut interest rates sooner than scheduled.

It declined 0.2% on a monthly basis in January, bringing the annual rate to 3.1%, compared with 3.7% in December.

The report will be published later in the day, but individual states have already started publishing their data. All have pointed to a sharp decline in annual data, suggesting inflation is declining in the eurozone’s major economy.

At the same time, prices decreased by 1.6% month-on-month in December, as consumers are under great pressure.

ING says these figures “keep the door open to an ECB rate cut in April.” “This is not our view, but it does mean that as Friday’s US jobs report approaches, the EUR/USD pair should close the week with weakness.”

The pair fell 0.1% to 1.2683, ahead of Thursday’s monetary policy meeting.

House prices in Britain have increased more than expected this month. Nationwide Building Society said house prices rose 0.7% in January compared with the previous month after holding steady in December.

Yen has registered a sharp monthly decline

In Asia, the pair fell 0.1% to 147.43, giving the yen a slight boost, although it is on track to fall nearly 5% this month, its biggest monthly decline since June 2022, as it raised its Maintained ultra-relaxed monetary policy. ,

The pair has risen as high as 7.1759, and is expected to fall about 1% this month as China recorded a fourth consecutive month of contraction in January.

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