US Dollar Steady as Investors Await Key Lease and CPI Data

12 June 2024

    The US Dollar is holding steady early Wednesday, as investors gear up for key macroeconomic events that could significantly impact the currency’s valuation. The Bureau of Labor Statistics will release the Consumer Price Index data for May in early U.S. trading. Later in the day, the Federal Reserve will announce monetary policy decisions and publish the revised Summary of Economic Projections (SEP), the so-called dot plot.

    The action in foreign exchange markets remained choppy in the absence of high-tier data releases on Tuesday. Although the DXY Dollar Index registered daily gains, it struggled to gather bullish momentum, while the benchmark 10-year US Treasury bond yield lost more than 2% and Wall Street’s main indexes ended the day mixed.

    Key Economic Indicators

    The annual CPI is forecast to rise 3.4% in May, matching April’s increase. On a monthly basis, the CPI and the core CPI, which excludes volatile food and energy prices, is expected to increase 0.1% and 0.3%, respectively. Later in the day, the Fed is set to leave the policy rate unchanged at 5.25-5.5% range and investors will pay close attention to macroeconomic projections, especially the interest rate.

    China’s CPI data showed a decline of 0.1% on a monthly basis, while the annual CPI rose 0.3%. After closing the day virtually unchanged on Tuesday, AUDUSD edged higher in Asian trading on Wednesday and was last seen trading slightly above 0.6600.

    USDJPY extended its sideways grind above 157.00 early Wednesday after failing to make a decisive move in either direction on Tuesday. The Producer Price Index in Japan rose 0.7% on a monthly basis in May, surpassing the market expectation for an increase of 0.4%.

    European Market Movements

    The UK’s Office for National Statistics reported that the UK economy stagnated in April, with the monthly real Gross Domestic Product arriving at 0%. In the same period, Industrial Production contracted by 0.9% and Manufacturing Production decreased by 1.4%. The GBPUSD pair largely ignored these readings and was last seen fluctuating slightly below 1.2750.

    EURUSD remained under bearish pressure on Tuesday and registered its lowest daily close in over a month below 1.0750. The pair struggles to stage a rebound and continues to trade below 1.0750 in European trading on Wednesday.

    After finding support near $2,300, Gold recovered modestly and registered small gains on Monday and Tuesday. XAUUSD remains relatively quiet early Wednesday and fluctuates above $2,310.

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    What impact might todays CPI data and Fed decisions have on the US Dollars value?

    Todays CPI data and Fed decisions could significantly influence the US Dollars value. A higher-than-expected CPI may prompt the Fed to raise interest rates, boosting the dollar. Conversely, a dovish stance from the Fed could weaken the dollar as investors seek higher returns elsewhere.

    Can the Federal Reserves announcement impact the US Dollars valuation?

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