Anna 
The U.S. dollar maintained its strength, reaching a one-month high, as doubts increased over early interest rate cuts by the Federal Reserve, while the pound surged on robust inflation data.
As of 04:15 ET (09:15 GMT), the Dollar Index, tracking the greenback against six other currencies, edged 0.1% higher to 103.247. It came close to the 103.55 level observed earlier, marking its highest point since Dec. 13.
The dollar found support after Federal Reserve Governor Christopher Waller indicated that interest rate cuts were likely in 2024 but not in the near-term, citing the ongoing resilience of the U.S. economy. The uncertainty surrounding the timing of rate cuts contributed to the dollar’s rebound this year, following a challenging period at the end of 2023.
According to CME’s FedWatch Tool, market expectations of a rate cut in March slightly eased to a 62.2% chance, down from 76.9% in the prior session.
All eyes are on the upcoming U.S. retail sales data, set to be released later Wednesday, as it will provide insights into the resilience of consumer spending amidst elevated interest rates.
Meanwhile, the GBP/USD pair rose 0.2% to 1.2657 following a surprising uptick in UK consumer price inflation for December, reaching 4.0% on an annual basis, up from 3.9% in November. This unexpected surge tempered expectations for Bank of England interest rate cuts, given the stickiness of inflation.
In contrast, EUR/USD dipped 0.1% to 1.0868, nearing a one-month low, despite hawkish comments from several European Central Bank policymakers emphasizing the need to curb inflation. Eurozone consumer inflation is anticipated to be confirmed later, rising to 2.9% in December from the previous month’s 2.4%, reversing a six-month trend of consecutive declines.
In Asia, USD/CNY increased 0.1% to 7.1969 as the yuan retreated on disappointing Chinese growth data for the fourth quarter, barely exceeding government estimates for 2023 growth at 5%. This lackluster performance set a cautious tone for China in 2024.
USD/JPY traded 0.5% higher at 147.90, with the yen weakening beyond the 147 level for the first time in over a month, influenced by expectations that the Bank of Japan will maintain its ultra-dovish stance in the aftermath of a recent devastating earthquake.
