Dollar firm as geopolitics heat up; investors await US inflation data
The dollar held steady on Wednesday ahead of U.S. inflation data this week that could help shape the outlook forFederal Reservepolicy, while a fraught geopolitical backdrop underpinned the likes of the Swiss franc.
Employment data in the last week has shown the U.S. economy created far fewer jobs in the last year than expected, which has made a rate cut from the Fed next week look like a certainty.
Yet it has not dented confidence in the equities market, where stocks trade at record highs, nor has it had much immediate impact on the dollar itself, even as investors weigh up the chances of a jumbo half-point cut from the Fed next week.
Israel's attempted killing of Hamas leaders with an airstrike on Qatar on Tuesday, along with Poland shooting down drones that entered its airspace during a Russian attack in western Ukraine on Wednesday, are keeping investors nervous.
The euro was subdued against the dollar, but jumped as much as 0.5% against the Polish zloty to 4.268 zloty, its biggest one-day rise in three months .
In terms of Fed expectations, traders are fully pricing in a quarter-point cut next week, with a minor chance of a half-point cut. This week's reports on wholesale inflation due on Wednesday, and consumer inflation on Thursday, could affect that outside prospect of a larger cut, analysts said.
Meanwhile, the prime ministers of both France and Japan have resigned this week, stirring up uncertainty over the political and economic outlook in two out of the world's seven richest countries.
The euro was little changed at $1.1702 after dropping 0.5% in the previous session, while the yen was flat at 147.49 per dollar and the Swiss franc was not far off Tuesday's seven-week highs, with the dollar trading at 0.798 francs.
The dollar index , which measures the U.S. currency against six others, was steady. It has fallen by 10% this year, dented by chaotic U.S. trade and fiscal policy and by growing concern about the independence of the central bank.
Markets reflected little reaction to a court ruling that temporarily blocked President Donald Trump from removing Fed Governor Lisa Cook, a case that is likely to end up before the U.S. Supreme Court.
Data on Tuesday showed the economy likely created 911,000 fewer jobs in the 12 months through March than previously estimated, suggesting job growth was already stalling before Trump's aggressive tariffs on imports.
The data did not offer much insight into job creation since March, leaving U.S. rate expectations unchanged for now.
Source: Reuters
