Dollar Picks Up Steam Before the Crucial CPI Release
Prior to the week's much anticipated U.S. inflation numbers, which may shed more light on the Federal Reserve's rate hike path, the U.S. dollar moved up during early European trade on Monday, trading near to a five-week high. The Dollar Index, which measures the value of the dollar against a basket of 6 different currencies, was 0.1% higher at 103.640 at 07:05 GMT, not far from the high of last Tuesday, which was the best level since January 6. The most recent consumer price index for the United States will be released on Tuesday. It is predicted that while monthly rates increased slightly in January, annual measurements decreased.
Ahead of the CPI report, traders seem to favor the dollar defensively following adjustments to the prior data set revealed that consumer prices increased in December rather than declining as previously anticipated. A one-year inflation estimate higher than January's final figure was also revealed by the University of Michigan study on Friday. Particularly in light of the positive jobs report from earlier in the month, a strong inflation reading could prompt investors to question if the Fed could really lower rates this year. As a result of the U.S. shooting down a fourth item over North America over the weekend, which increased concerns about rising international tensions just after Chinese spying balloon was shot down last week, the dollar has also benefited from its position being a safe haven for many investors.
Other than that, after data released on Friday revealed that the gross domestic product dipped 0.5% on the monthly in December, the GBP/USD exchange rate dropped by 0.1% to 1.2049 and remained low.
Near Monday's five-week low of 1.0656, the EUR/USD exchange rate was trading unchanged at 1.0675. The Eurozone is scheduled to disclose revised GDP figures on Tuesday, and the European Commission will publish quarterly economic estimates for the euro region on Wednesday.
Also USD/JPY increased by 0.6% to 132.13, with the JPY giving back much of Friday's gains due to rumors surrounding the Bank of Japan's future governor.