This Monday, the dollar index remained steady at around 104 points, but investors were cautious as they awaited the highly anticipated release of US consumer inflation data on Tuesday.
The greenback saw some downward pressure last Friday, as revised figures showed a smaller increase in the Consumer Price Index (CPI) for December.
Market participants are on edge as the highly anticipated US consumer price report for January approaches and is set to impact expectations regarding the Federal Reserve’s future decisions. Projections indicate a 0.2% increase in the headline CPI and a 0.3% uptick in core CPI.
All eyes are now on the potential for a Federal Reserve interest rate reduction. The consensus is that the move could occur in May, as opposed to March as thought previously.
Traders are also awaiting Thursday’s retail sales report and Friday’s producer inflation figures, as well as speeches from several Federal Reserve officials.
The US dollar could strengthen if the consumer price report suggests higher-than-expected inflation, reinforcing expectations of a less dovish stance by the Federal Reserve. Conversely, weaker-than-expected inflation could weaken the currency.