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US Dollar strengthened in major pairs ahead of tomorrow's release of US inflation data. USD/JPY even jumped 0.75 percent to 132.40.
The US dollar index (DXY) increased to the 103.80 range in trading this Monday (13/February). The greenback started to move after the release of Michigan consumer sentiment data in the New York session last week, then continued thanks to expectations of higher US inflation.
DXY Daily The DXY Daily chart via TradingView
University of Michigan (UoM) reported on Friday that the consumer sentiment index from the survey results in early February 2023 showed an impressive increase from 64.9 to 66.4, or exceeded the consensus estimate of only 65.0. Respondents' assessment of current economic conditions also improved from 68.4 to 72.6. Meanwhile, inflation expectations for the year ahead rose from 3.9% to 4.2%.
Ahead of the release of the US inflation report tomorrow, the UoM report provoked speculation. The current consensus expects the US inflation report to show an increase of 0.5% monthly (Month-over-Month) but a decline from 6.5% to 6.2% annually (Year-on-Year). The UoM report sparked speculation for the actual data to be higher than the estimate, especially for the component of core prices outside the housing sector (core inflation ex-housing).
Higher actual inflation data may encourage market players to clear speculations about the Fed's interest rate cut this year. As a result, the US dollar stretched again. EUR/USD is holding near one-month lows in the 1.0680s band, further away from the multi-month record high in early February. Meanwhile, GBP/USD fell again by 0.1 percent amid the shadow of a recession in the UK economy.
USD/JPY surged 0.75 percent to 132.40 as the continuing maze of rumors surrounding the succession to the leadership of the Japanese central bank (BoJ). Market players had previously hoped that the nomination of Kazuo Ueda as a replacement for Haruhiko Kuroda would prompt a shift towards a more hawkish side. However, Ueda, yesterday expressed his support for the BoJ's ultra-loose monetary policy launched by Kuroda.
