Asian session review: the US dollar is showing positive dynamics

During today's Asian trading, the US dollar rose strongly against major currencies, which was caused by a decrease in the likelihood of easing the Fed's monetary policy at the March 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) rose by 0.48% to 103.76 (the highest value since December 13). Yesterday, the index added 0.15% on the back of the results of the Fed meeting and the statement by Central Bank Chairman Powell. The Fed left interest rates unchanged, as expected, and indicated that it would not lower them until inflation "steadily approaches" the 2% target.  In its statement, the U.S. Central Bank also dropped a long-standing reference to a possible further increase in borrowing costs. Meanwhile, Powell strongly rejected the idea that the central bank could cut rates in the spring, as many market participants expected. "I don't think the Committee will reach the right level of confidence by the time of the March meeting to cut rates, but that remains to be seen," Powell said, adding that a March cut is not a baseline scenario for policymakers. According to the CME FedWatch Tool, markets see a 35.5% probability of a 25 basis point rate cut at the Fed meeting in March and a 94.0% probability of a rate cut in May.

The yen consolidated against the US dollar after rising by 0.5% yesterday on the back of lower US bond yields and news of problems at the regional American lender New York Community Bancorp.

The pound fell by 0.25% against the US dollar, while investors are preparing for the announcement of the results of the Bank of England meeting. Many experts expect that policymakers will prefer to keep the interest rate at 5.25%. Economic data from the UK has been generally weak recently, but economists do not yet consider a rate cut appropriate. Meanwhile, inflation and wage data are probably still too high, according to the Bank of England: core inflation in December was 5.1% year-on-year. And although wage growth has slowed, this figure is certainly still higher by historical standards. These factors contribute to the forecast that the Bank of England will keep rates at the same level before reducing by 25 bps at the June meeting. Although today's meeting will most likely not lead to a change in the interest rate, market participants will carefully study the statement for any changes in the "dovish" tone that may signal possible timing of monetary policy easing.