Some US inflation data hinted at the possibility of the Federal Reserve delaying interest rate cuts, so the US dollar strengthened.

The US Dollar responded positively to a series of US inflation data releases this week. The greenback rallied in all major currency pairs, while the US Dollar Index (DXY) climbed back towards the 103.50 threshold in Friday's European session (15/March).

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Both consumer inflation (CPI) and producer inflation (PPI) data hinted at the possibility of the Federal Reserve delaying its interest rate cut. CME's FedWatch now shows a 60% chance of a Fed rate cut scenario starting in June - down from 74% last week.

Ryan Brandham of Validus Risk Management told Reuters that the data underscores "the risk that the last-ditch effort at controlling US inflation may not be as easy as the progress that has been made to date". Therefore, he argued the Fed could have "more reason to delay the timing of a rate cut in 2024".

The US central bank will hold its Federal Open Market Committee (FOMC) meeting next week, March 19-20, 2024. Most market participants expect the Fed not to change interest rates on this occasion. Instead, the market will pay close attention to the exposure regarding interest rate projections (Dot Plot scheme) and comments from Fed Chairman Jerome Powell.

In this situation, expectations of a delayed rate cut supported the US dollar exchange rate. GBP/USD fell below 1.2750 today despite being supported by the improvement in the UK GDP data over the last month. EUR/USD is also depressed at around 1.0880s due to yesterday's dovish statements from several ECB officials.

USD/JPY continued to rise to 148.75. The publication of the results of the salary negotiations of Japanese companies showed the fastest increase in the last 30 years, thus increasing the prospect of a BoJ rate hike this month. However, market participants still doubt the readiness of BoJ officials to change policy.