US dollar banknotes.
Liu Jie | Xinhua via Getty
On Thursday, the dollar hovered above a five-month low versus major peers as investors looked at US inflation data and the European Central Bank meeting later in the day, while the volatility index of major currencies fell to new lows.
Investors spent the whole week on a wait-and-see approach, sucking volatility from the market and leaving major currencies mostly limited.
The dollar index hovered in a narrow range around the psychologically important 90 level and was last seen at 90.206 – not too far from last month’s low of 89.533, a level not seen since early January.
The euro climbed to a weekly high of $ 1.2218 on Wednesday, but was little changed and was little changed at $ 1.2169 in European trade.
The yen has traded at 109.46 per dollar, also slightly unchanged from Wednesday and near the midpoint of the 109.19-110.325 range over the past two weeks.
The Deutsche Bank Currency Volatility Index, which hit its lowest level since February 2020 earlier this week, fell further to a new low.
The US Department of Labor data on consumer prices was highly anticipated after last month’s report showed that consumer prices rose the most in nearly 12 years in April.
This has encouraged higher prices to last longer than some expect, which could cast doubt on the Federal Reserve’s insistence that current inflationary pressures are temporary and that monetary stimulus should remain in place for some time to come.
Economists polled by Reuters estimated that the consumer price index rose 0.4% in May.
“Ahead of publication, our economists expect both the headline and core inflation to be above consensus,” said Valentin Marinov, head of G10 currency research at Credit Agricole.
If implemented, it could trigger intraday volatility and a reversal in some of the most recent falls in US Treasury yields, Marinov said.
“The dollar could benefit as a result across the board, especially if the seal is seen as potentially leading to more aggressive or less dovish results from next week’s June FOMC meeting.”
While the dollar has traded in tight ranges ahead of the CPI report, the benchmark 10-year Treasury yield that helped push the dollar index to a multi-year high earlier this year has dropped significantly in the past. week and were at the level of 1.5025% in Europe from 1.6350% on Friday.
As for the ECB, investors will be on the lookout for any signs of an imminent slowdown in its bond buying program.
While many expect the ECB to keep its policy stable, the euro may be sensitive to changes in the bank’s economic forecasts or any signal that the pace of bond purchases could slow in the coming months.
“We expect the ECB to avoid any talk of a narrowing, but given that this has already been reported by ECB officials, this should not come as a surprise to the markets and, in turn, should have a limited impact on the euro,” strategists said. ING. note.
“Given the expectation that there will be no change in advice on buying assets, the risk balance will be slightly biased towards the upside of the euro, unless the ‘phasing out’ message is convincingly repeated at the press conference or some communication gaps are presented.
In cryptocurrency markets, Bitcoin retained profit from its largest gain in four months on Wednesday, when it jumped nearly 12%.
It last traded slightly higher to $ 38,160 after rebounding from a three-week low of $ 31,025 hit Tuesday, when signs of caution from institutional investors and regulatory attention spurred selling.
The most famous digital token barely hit a record $ 64,895.22 in mid-April.