The U.S. dollar held steady as traders weighed FED rate cut bets

(1) The U.S. dollar held steady on Friday after data showed that U.S. inflation remained sticky but gradually slowed, keeping the possibility of a Fed rate cut in June alive. (2) The U.S. Commerce Department reported on Thursday that U.S. prices rose faster in January from the previous month, as the cost of services such as housing and finance surged, but the year-on-year increase hit a three-year low. (3) The U.S. dollar index fluctuated overnight after the release of the inflation report. Last reported at 104.10. (4) Commonwealth Bank of Australia strategists said in a note: “These data do underscore the need for the FOMC to remain cautious before starting Intrerest Rate normalisation, especially against the current backdrop of a still tight labour market.” ” (5) A flurry of strong U.S. economic data and recent reports showing persistent price pressures have prompted traders to rethink when the Fed will start its easing cycle, which they now expect June to likely be the starting point. (6) According to CME Group’s FedWatch tool, the market is pricing in a 66% chance that the Fed will cut rates in June, compared with a start in March at the beginning of the year. Traders expect an 82 basis point cut this year, close to the Fed’s own estimate of a 75 basis point cut and well below the 150 basis point cut expected at the beginning of the year. (7) Fed officials ignored recent data showing a rebound in price pressures last month and instead focused on the overall progress of inflation, which they said could determine the timetable for rate cuts later this year. Investors’ attention will now turn to next week’s non-farm payrolls data to gauge the state of the U.S. labor market. (8) Rob Carnell, head of research for Asia Pacific at ING, said: “We need to see a breakthrough in data, both up and down. Otherwise, there isn’t any real catalyst to move anything forward at the moment”