Asian session review: the US dollar traded steadily against major currencies

During today's Asian trading, the US dollar consolidated against major currencies after yesterday's rally caused by the publication of US inflation data, which sharply reduced the likelihood of easing the Fed's monetary policy at the June meeting.

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 0.04% to 105.21. Yesterday, the index jumped by 1.05%, reaching its highest level since November 14. The data showed that the consumer price index (CPI) rose by 0.4% m/m in March, exceeding forecasts (+0.3%). In annual terms, inflation rose by 3.5%, while economists had expected an increase of 3.4%. Excluding volatile food and energy prices, the core CPI rose 0.4% m/m, against expectations of a 0.3% increase. On an annualized basis, the core CPI increased by 3.8%, while economists had expected an increase of 3.7%. The inflation data destroyed the hopes of the markets for easing the Fed's policy in the short term. According to the CME FedWatch Tool, markets see a 5,9% probability of a 25 basis point rate cut at the Fed meeting in May, and a 16.9% probability of a rate cut in June (compared to 65.8% a week earlier). In addition, the markets now forecast a rate cut of only 50 basis points in 2024, which corresponds to two 25bp cuts, compared with three cuts predicted just a month ago. Investor focus will now be on U.S. producer price data, which will be published at 12:30 GMT. Economists expect producer price growth to slow to 0.3% m/m in March from 0.6% m/m in February.

The yen rose 0.1% against the US dollar, to 153.07, but remains at its lowest level in 34 years. Yesterday's collapse of the yen to the level of 153.24 per US dollar increased concerns about intervention, as the authorities in Tokyo confirmed that they do not rule out any steps to combat excessive fluctuations. Japan intervened three times in 2022, when the yen fell to a 32-year low (152 yen per dollar). Since the beginning of 2024, the yen has fallen by about 8.3% against the dollar. Experts expect Tokyo authorities to keep talking tough and intervene if things look disorderly.

The euro has stabilized against the US dollar as investors await the announcement of the outcome of the ECB meeting. The ECB is expected to leave interest rates unchanged, but is likely to signal that a rate cut may occur as early as June.