Currency market subdued ahead of fresh US economic data
By Brigid Riley
TOKYO (Reuters) — The currency market was sedate on Thursday, with the U.S. dollar consolidating against major peers as market players awaited more data out of the world's largest economy for clues on the direction of Federal Reserve policy.
Tuesday's hotter-than-expected U.S. consumer price index (CPI) has re-ignited concern that inflation could remain sticky, leaving traders to reassess if the Fed will start cutting interest rates at its June meeting as previously expected.
Market participants still see a 65% chance of a rate cut in June, though that has edged down from 71% earlier in the week, showed LSEG's rate probability app. The likelihood of a July rate cut sits around 83%.
With the Fed widely expected to hold rates steady at its meeting next week, attention will be on the bank's updated economic projections.
«The data is driving marginal changes in rate expectations, but ultimately, the markets have been pretty settled recently on three cuts this year,» said Kyle Rodda, senior financial market analyst at Capital.com.
«A more hawkish Fed next week could lower that to two (rate cuts) and defer expectations for the first to September,» which would essentially be a bull case for the U.S. dollar, he said.
The dollar index, which measures the greenback against a basket of six currencies, was mostly flat at 102.77.
Markets will be scrutinising U.S. retail sales data, the producer prices index (PPI) report and jobless claims due later on Thursday for more evidence of the economy slowing down.
Fed Chair Jerome Powell said last week the U.S. central bank was «not far» from gaining the confidence needed to begin easing.
Against the yen, the dollar held at 147.69 yen, as an exit from negative rates at the
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