(Adds dateline, byline comment in paragraphs 3-5, bitcoin at
fresh two-year high in last paragraph, updates prices at 10:30
a.m. ET/1530 GMT)
NEW YORK/LONDON, Feb 12 (Reuters) – The dollar edged
higher against the euro and other major currencies on Monday as
investors await data on U.S. inflation and retail sales this
week for clues on when the Federal Reserve may begin widely
anticipated interest rate cuts.
The dollar index, a measure of the U.S. currency
against six others, rose 0.25% to 104.23 as the market expects
the consumer price index (CPI) for January – due to be released
on Tuesday – to give the Fed further confidence that inflation
is slowing towards its 2% target.
Retail sales for last month on Thursday are expected to slip
a bit to also confirm decelerating inflation and cap rising
Treasury yields and the dollar’s recent strength, said Marc
Chandler, chief market strategist at Bannockburn Global Forex in
New York.
“Soft CPI and soft retail sales should help boost the Fed’s
confidence that inflation is coming back to its target,” he
said, adding that Fed Chair Jerome Powell was using the data to
judge the outlook on inflation.
“This week’s data should help boost his confidence.”
The euro fell 0.22% to $1.07595 as a holiday in most
major Asian markets kept markets relatively subdued at the start
of what could prove a busy week.
The euro fell from a 10-day high touched in early trading
after last week saw a small rebound following steady declines so
far in 2024. A reading of the euro zone’s economic growth in the
fourth quarter on Wednesday could provide fresh direction.
Changing expectations of when and how quickly central banks
will cut interest rates as inflation falls are a significant
driver of currency markets at present.
Strong jobs data this month has largely taken a Fed rate cut
in March off the table, with markets seeing a move in May as
somewhat more likely.
The U.S. data also caused market pricing for the first
European Central Bank (ECB) rate cuts to be pushed back, even
though economic data in Europe has been weaker.
That lack of divergence between the Fed and other central
banks, including the ECB, has kept the dollar largely rangebound
and prevented it moving significantly higher, said Simon Harvey,
head of FX analysis for Monex Europe.
“In the interim we keep floating around, and U.S. CPI will
determine how the dollar trades within those ranges,” he said.
Analysts expect U.S. core CPI to come in at 0.3%
month-on-month in January, but a still elevated 3.7%
year-over-year, according to a Reuters poll of economists.
Elsewhere, there is plenty of data due this week in Britain,
including inflation and GDP numbers with the former, on
Wednesday, similarly likely to influence opinion on when the
Bank of England will start to cut interest rates – it is
currently seen lagging the Fed and ECB.
Sterling was last trading at $1.2613, down 0.10% on
the day.
Markets are also keeping an eye on the highly rate-sensitive
yen, which strengthened sharply late last year as markets priced
in early U.S. rate cuts, but has since weakened as that timing
got pushed back.
Japanese authorities intervened in late 2022 to prop up the
yen, which weakened to as much as 151.94 per dollar.
Japanese yen weakened 0.07% at 149.43 per dollar.
Bitcoin rose 4.43% to $49,649.00, its highest since
December 2021.
(Reporting by Alun John; Editing by Kirsten Donovan, Ed Osmond
and Alex Richardson)
