Dollar Rising in Choppy Trade as Inflation Data Watched

U.S. dollar banknotes are displayed in this illustration taken February 14, 2022. REUTERS/Dado Ruvic

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NEW YORK, May 10 (Reuters) – The dollar rose on Tuesday, after fluctuating between modest gains and declines earlier in the session as it held on to a nearly two-decade high ahead of a key reading on inflation that could provide clues about the Federal Reserve. monetary policy trajectory.

Stocks were also choppy and off their initial highs, although a drop in the yield on the benchmark U.S. 10-year note below the 3% level helped lift growth stocks and put the Nasdaq ( .IXIC) and the S&P 500 (.SPX) on track. to snap a three-day losing streak.

Investors will closely watch Wednesday’s April consumer price index reading for any signs that inflation may start to subside, with expectations calling for an 8.1% annual increase from the upside 8.5% recorded in March. Read more

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“It’s quiet ahead of inflation data tomorrow, so that allows for a break for risky assets,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington, DC.

“Nothing has materially improved in terms of global growth, China concerns, so the market just sees there’s an opportunity ahead of tomorrow’s inflation data and there’s a bit of positioning ongoing and it works in favor of risky assets.”

The dollar index rose 0.203% to 103.900, with the euro down 0.24% to $1.053.

The greenback has soared nearly 9% this year to 20-year highs as investors have turned to safe haven amid concerns about the Fed’s ability to rein in inflation without causing a recession, as well only worries about the slowdown in growth resulting from the war in Ukraine. and the increase in COVID-19 cases in China.

After the Fed raised its overnight rate by 50 basis points last week, the biggest hike in 22 years, investors tried to gauge the central bank’s aggressiveness. Expectations are fully priced in for another hike of at least 50 basis points at the central bank’s June meeting, according to CME’s FedWatch tool.

Several Fed officials on Tuesday echoed the need for a 50 basis point hike at the next meeting. Cleveland Federal Reserve Chair Loretta Mester said Tuesday that raising interest rates in half-point increments “makes perfect sense” for the Fed’s next two meetings. Read more

New York Fed Chairman John Williams said Chairman Jerome Powell’s indication that the central bank would hike half a percentage point at the next two policy meetings was reasonable. Read more

In addition, Federal Reserve Governor Christopher Waller said now is the time to “strike” by raising rates to deal with too-high inflation and a “cracked” labor market. Read more

“They’ve been so hawkish that the market wants to sniff it out at any little move,” said Matthew Miskin, co-head of investment strategy at John Hancock Investment Management in Boston.

“Emotionally, a lot of people are looking for surrender. The dots aren’t completely connected for that yet.”

The Japanese yen weakened 0.12% against the greenback at 130.42 to the dollar, while the pound last traded at $1.2315, down 0.13% on the day.

In cryptocurrencies, Bitcoin last rose 2.22% to $31,627.41 after falling below $30,000 for the first time since July.

Ethereum last rose 3.92% to $2,380.61.

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Additional reporting by Sinéad Carew, editing by William Maclean and Cynthia Osterman

Our standards: The Thomson Reuters Trust Principles.

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