Investing.com – The U.S. dollar edged higher in European deals on Thursday, maintaining recent strength ahead of new U.S. interest rate data in the form of manufacturer inflation and retail sales data.
At 0600 ET (1000 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was trading 0.1% higher at 102.490.
The dollar is growing ahead of the publication of the US producer price index
The dollar received support early in the week following the release of stronger-than-expected US data earlier this week, adding to bets that the Federal Reserve is in no rush to cut interest rates.
The US currency has fallen about 1.7% over the past month, hurt last week by dovish comments from Fed Chairman Jerome Powell during his two days of testimony before Congress that were seen by markets as indicating the US central bank was preparing to start cutting interest rates in the summer.
However, the index is still up about 1.5% this year as U.S. data showed the economy remained strong and Tuesday’s release of the consumer price index showed inflation remained a major stumbling block.
The focus now is on releasing the report for February in particular, and for the same month, to get more clues about Fed officials’ likely thoughts ahead of next week’s policy meeting.
“The Producer Price Index will be watched very closely as investors seek confirmation that inflation is not as high as the CPI report suggests,” ING analysts said in a note. “The consensus is 0.2% month-on-month for core CPI, but the implied value is certainly higher after CPI.”
The Euro has no volatility; Will the ECB start cutting soon?
In Europe, the index fell 0.1% to 1.0942, with a lack of major economic data in the eurozone contributing to the lack of volatility.
Rates were kept at a record high of 4% last week, but traders expect the central bank to start cutting interest rates soon given slow growth in the region, and Germany in particular.
The European Central Bank is likely to start cutting rates in the spring, French central bank chief and ECB policymaker Francois Villeroy de Gallo said on Wednesday, describing spring as the period from April to June.
ECB chief Christine Lagarde strongly hinted earlier this month that the long-awaited rate cut would likely come at the central bank’s meeting in early June rather than in April.
trading 0.2% higher at 1.2816, with interest rates widely expected to remain unchanged when it meets next week as inflation remains above the central bank’s medium-term 2% target.
Bank of Japan meeting is of great importance
In Asia, trading rose 0.1% to 147.82, with the yen giving back some of its recent gains and set to rebound next week.
Reports suggest the central bank is very close to ending its ultra-loose monetary policy, especially after an upward revision to data showed the Japanese economy evading a technical recession in the fourth quarter.
The index rose 0.1% to 7.1902 amid lingering doubts about the country’s economic recovery, while it rose 0.1% to 0.6624, with stronger commodity prices pushing the Australian dollar to a nearly two-month high in recent sessions.