Asian session review: the US dollar shows minimal change

During today's Asian trading, the US dollar consolidated against major currencies, while investors continued to analyze inflation data and assess their impact on the Fed's interest rate decision.

The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.03% to 103.12. Yesterday, the index rose by 0.17%, as data showed that in January core PCE price index rose by 0.4% m/m, as expected, while the annual rate fell to 2.8% from 2.9%, reaching a 3-year low. Overall, the data pointed to the need for the Fed to remain patient and not rush to cut interest rates, especially in the current context of a still-tight labor market. According to the CME FedWatch Tool, markets see a 25.8% probability of a 25 basis point rate cut at the Fed meeting in May, and a 66.3% probability of a rate cut in June, with 82 basis points of cuts priced in for this year (compared to 150 basis points earlier this year year). The next important release, which may affect the timing of monetary policy easing, will be the nonfarm payrolls report for February, which will be published next Friday.

The euro rose 0.1% against the US dollar, while investors are preparing for the publication of eurozone CPI data (at 10:00 GMT). Against the background of stagnating economic growth and falling inflation, ECB policymakers began to consider the idea of lowering rates later this year. At the same time, with wage pressures still elevated, some policymakers are also cautioning against easing monetary policy too early. Against this background, the February inflation data may affect whether the ECB will lower interest rates in April or take a more patient approach and wait for its June meeting. Economists expect the February consumer price index to bring more good news on inflation, with the underlying effect likely to lead to a further slowdown in overall inflation to 2.5% year-on-year, while core inflation is projected to slow to 2.9%. There will also be interest in whether inflation in the service sector will slow down from the current 4.0%. If consumer inflation in the eurozone slows down in line with forecasts and even turns out to be below expectations, this will preserve the possibility of a rate cut in April.