The US dollar was mixed against its major currency rivals to close out the trading week as investors are still processing the red-hot January inflation data. With the financial markets holding steady, the greenback is attracting traders seeking shelter, but the reversal in yields is diminishing the buck’s weekly gain, too.
After price inflation came in way higher than economists had expected, the University of Michigan released its preliminary consumer sentiment numbers for February.
On Friday, the University of Michigan Consumer Sentiment Index plunged to 61.7, below the market consensus of 67.5. Consumer expectations fell 57.4, while current conditions eased to 68.5. Near-term inflation expectations rose to 5% and five-year inflation projections held steady at 3.1%.
Although the gross domestic product (GDP) advanced in the fourth quarter, consumers are not optimistic about the present and future economy.
Meanwhile, next week, the producer price index (PPI) will be released, and market analysts are anticipating some easing in wholesale prices. Retail sales, industrial production, and housing data will come out, too.
Until then, investors are weighing on the Federal Reserve’s quantitative tightening efforts. Traders are split if the US central bank will accelerate rate hikes and shrinking the balance sheet.
According to a plethora of surveys and research notes from financial institutions, the most likely scenario is that the Fed will raise rates by 50 basis points at the Federal Open Market Committee (FOMC) policy meeting in March.
US Treasury yields were mostly in the red to finish the trading week, with the 10-year bond down 0.014% to 2.015%. The one-year bill shed 0.011% to 1.075%, while the 30-year bond edged up 0.013% to 2.315%.
The US Dollar Index (DXY), which gauges the greenback against a basket of currencies, advanced 0.2% to 95.75, from an opening of 95.55. The index is poised to squeak out a weekly gain of 0.28%, but it is still down about 0.2% year-to-date.
The USD/CAD currency pair fell 0.33% to 1.2677, from an opening of 1.2720, at 14:32 GMT on Friday. The EUR/USD tumbled 0.22% to 1.1403, from an opening of 1.1428.