US dollar steady, data eyed

The US dollar index hovered near a one-month peak after upbeat retail sales data reduced expectations for rushed Federal Reserve interest rate cuts.

The greenback hit 103.69 overnight before easing to 103.29 amid Asia trading. Markets now see a 61% probability of a March Fed cut, down from 65.1% Tuesday, though still 150 basis points of easing is priced by end-2022.

The euro bounced slightly from a five-week trough to trade 0.09% higher around $1.08915, after ECB President Lagarde signalled majority summer rate cut backing.

The dollar touched 148.525 overnight versus the yen – the highest level since November – with investors scaling back bets on Bank of Japan tightening. The USD/JPY cross recently eased 0.08% to 148.04.

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Sterling snapped a three-day decline following above-forecast UK inflation. The surprise supports views of a potential BoE rate hike before cuts. The pound saw minimal change at $1.26815.

The Australian dollar bought $0.65545 after December jobs figures missed expectations. While the data challenges views of a 3.1% RBA rate peak, the Aussie saw only modest overnight losses.

Traders will further look to US economic releases later today including Initial Jobless Claims, the Philly Fed Manufacturing Index, and housing market statistics.