During the early Monday trading session, the US Dollar was gaining ground against other key currencies. In fact, the USD is at a 5-week high against most other currencies and is now waiting for the US inflation data release.
According to experts, the upcoming CPI data will provide a clear direction on how the Fed will approach its rate hike policy. After all, the only reason we have higher interest rates and a stronger US Dollar is inflation.
Dollar Index Marginally Higher Before CPI Data
The Dollar index is marginally higher against 6 major currencies and was last seen trading around 10.364. Overall, the Dollar index has gained 0.1% upside from the 103.96 level seen last Tuesday.
The upcoming CPI release will be released in the next few days, and markets expect an uptick for January. But the annual inflation measure in the USA is expected to decline!
In addition, the markets are also accounting for a bullish US dollar mainly due to the uptick in the inflation data!
According to experts, a stronger inflation reader will force the Fed to rethink rate cuts expected later this year. In addition, we already have a stronger jobs report which is yet another reason for Fed to delay the rate cuts.
Another thing that provides support to the dollar is its status as a safe haven in times of turbulence & geopolitical tension. In the past few days, geopolitical tension went up the sky when the USA shot down a balloon of Chinese origin.
If we look at individual currency pairs, the USD/JPY is trading at 132.13 after gaining 0.6%. The Yen is also on the back foot after rumors that Kauzo Ueda will become the next governor of BOJ.
Similarly, the EUR/USD is trading at 1.0675 and remains flat ahead of the CPI. And if we look at the GBP/USD, it was last seen at 1.2049 after dropping 0.1%, which signifies the USD strength.