Asian session review: the US dollar is showing a weak increase

During today's Asian trading, the US dollar rose slightly against major currencies, while investors took a wait-and-see attitude ahead of the publication of US inflation data.

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) rose by 0.14% to 103.72 and is now trading near its highest level since December 13. Later today (at 13:30 GMT), data on personal income and consumer spending for December will be published, as well as the core personal consumption expenditure (PCE) price index, the Fed's preferred inflation indicator. Households continued to spend money in November as real personal spending rose 0.2% for the month. The rise in spending in November was accompanied by a 0.4% increase in real disposable personal income, the fastest increase in eight months. Although the labor market is showing signs of slowing, consumers are benefiting from rising real wages, which in turn increases spending. Consumers' reliance on credit also helps support spending. However, rising delinquencies on credit cards and auto loans are raising some doubts about how long households can continue to rely on credit. Both headline and core PCE deflators are expected to rise 0.2% for the month, which would be a slight acceleration from November. After this data, investors' attention will shift to the January Fed meeting, which will take place next week. Economists said the Fed is likely to keep current policy settings in place, but Chairman Powell's comments will be scrutinized to assess whether the U.S. central bank is ready to start cutting interest rates.

The euro fell 0.3% against the US dollar as the ECB took a small step towards cutting rates yesterday, although ECB President Lagarde stressed that inflationary pressures must ease significantly before the ECB can be confident of achieving its inflation target on a sustainable basis. Markets now estimate the probability of the first rate cut in April at about 60%, and also expect the ECB to cut rates by 130 basis points in 2024. In mid-January, they expected a rate cut by 150 basis points.