© Reuters.
Investing.com – The US dollar declined in early trading, on Tuesday, ahead of the latest reading, while the yen rose after naming the Bank of Japan’s new governor.
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The dollar index, which tracks the greenback against a basket of six other currencies, was down 0.2%, at 103,028.
Inflation and the Fed
The dollar has been trading in something of a holding pattern over the past few days as traders were awaiting the release of the latest US Consumer Price Index, which could provide more clues to the outlook.
The US central bank also raised interest rates earlier this month by 25 basis points, which moderated the pace of rate hikes, but the bank’s policy makers were careful to say that the fight against inflation continues and more increases should be expected.
So attention turns to today’s January inflation report, as the headline figure is expected to show that consumer prices rose at an annualized pace of 6.2% in January, down from 6.5% in December and well below the four-decade peak in June of 9.1%.
However, markets are also worried about any potential larger-than-expected surprises in core inflation, which excludes volatile energy and food prices, as the labor market remains strong, potentially spurring wage growth.
Market expectations.. Support the dollar
Experts expect the annual CPI to slow to 6.2% after recording 6.5% last month.
On a monthly basis, they expect it to record an increase of 0.5%, after increasing it by 0.1% in the previous reading, which may support the dollar in the coming months, especially since these numbers may push the Fed towards tightening the rate of hike.
Looking at the core consumer price index (excluding food and energy) on an annual basis, experts expect it to rise by 5.5%, slowing from its rise of 5.7% in the December data reading.
dollar against currencies
Elsewhere, the Japanese currency pair fell 0.3% to 132.04, following the nomination of Kazuo Ueda as the next governor of the Bank of Japan.
Ueda, a former BOJ policy board member but now an academic, was not seen as close to the top job before speculation began to surface late last week.
Thus, it is seen as an outsider who is not necessarily committed to the current ultra-easy policy of the central bank.
However, data released earlier on Tuesday showed that the Japanese economy rebounded much less than expected in the fourth quarter, rising 0.6% instead of the expected 2.0%, after declining by a revised 1.0% in the July-September period.
The US currency pair was also trading 0.2% higher at 1.0737, ahead of the release of the latest growth data for the region.
The European Commission raised its economic outlook for the European Union on Monday, saying the bloc is likely to avoid a recession thanks in part to lower gas prices.
The US currency pair also rose 0.2% to 1.2161, after the release of the latest employment data in the UK showed a decrease of nearly 13,000 in the number of claimants in January, indicating that the labor market remains strong despite the economic difficulties in the country.
Also, USD/AUD rose 0.1% to 0.6972, while USD/USD fell 0.1% to 6.8158, benefiting from a weaker greenback.
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