The US dollar seesawed at the end of the raucous trading week as investors dig through the latest inflation data that took financial markets by surprise. The greenback has taken a breather following the hotter-than-expected consumer price index (CPI), though it could remain elevated if the Federal Reserve keeps delaying the first interest rate cut.
Producer prices rose 0.3% in January, up from -0.1% in December and higher than the consensus estimate of 0.1%. The core producer price index (PPI), which omits the volatile and energy and food sectors, jumped 0.5% last month, higher than the economists’ expectations of 0.1%.
PPI and core PPI clocked in at 0.9% and 2% year-over-year, respectively.
In another major economic point to finish the trading week, the University of Michigan’s Consumer Sentiment Index (CSI) rose to 79.6 this up, up from 79 in January. However, it fell short of the market forecast of 80.
The UMich one- and five-year-ahead inflation forecasts clocked in at 3% and 2.9%, respectively.
This week, it was a mixed bag of economic data as investors struggle to determine what the Federal Reserve will do on interest rates.
According to the CME FedWatch Tool, the futures market is expecting a rate cut at the June Federal Open Market Committee (FOMC). Traders initially anticipated a rate cut in March until Chair Jerome Powell shrugged off a rate reduction.
Meanwhile, various developments are occurring in the broader financial markets.
US Treasury yields were up across the board on Friday, with the benchmark ten-year yield rising 5.5 basis points to 4.295%. The two-year yield added 8.8 basis points to 4.656%, while the 30-year bond jumped 2.7 basis points to 4.448%.
The US Dollar Index (DXY), a measurement of the greenback against a basket of currencies, teetered between positive and negative territory. The index dipped 0.1% to 104.19, from an opening of 104.30. The DXY was up 0.1% this week and rallying nearly 3% year-to-date.
The USD/CAD currency pair edged up 0.06% to 1.3474, from an opening of 1.3465, at 18:09 GMT on Friday. The EUR/USD swelled 0.12% to 1.0786, from an opening of 1.0773.