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US inflation data in focus as markets eye Fed rate cuts

The US dollar index held firm at 104.11 on Wednesday morning, consolidating its position ahead of the crucial release of March’s Consumer Price Index (CPI) data. This data is highly anticipated as it will provide …

The US dollar index held firm at 104.11 on Wednesday morning, consolidating its position ahead of the crucial release of March’s Consumer Price Index (CPI) data. This data is highly anticipated as it will provide clues on the Federal Reserve’s monetary policy direction.

Gold, a traditional hedge against inflation and geopolitical tensions, surged to a new record high of $2,359 per ounce on Tuesday and remains trading near record highs this morning.

Currency markets remain focused on the US CPI data due later today. Traders are looking for clues on the Fed’s monetary policy direction after last week’s robust jobs report fueled uncertainty about the timing and magnitude of potential rate cuts this year.

Gold eyes record highs as inflation, geopolitics collide
Gold prices hover near record highs as inflation fears and geopolitical tensions create a perfect storm for the safe-haven asset.

Economists predict a year-on-year inflation rate of 3.4% for March, slightly higher than February’s 3.2%. A higher-than-expected figure could push back hopes for an early rate cut, potentially strengthening the dollar. Even a lower reading might provide only temporary relief as concerns about underlying inflation linger.

The Japanese yen, under pressure due to elevated US Treasury yields, remained close to its 34-year low against the dollar at 151.81 per dollar. No fresh warnings have been issued by Japanese authorities ahead of the data release, while traders remain wary of a possible intervention.

The New Zealand dollar briefly jumped to a three-week high after the Reserve Bank of New Zealand held interest rates steady, as anticipated, but warned of persistent inflation. The Australian dollar, on the other hand, dipped to $0.662.

The euro and pound remained largely unchanged ahead of today’s data.

Investors are now primarily focused on the upcoming US CPI data, which could influence the Fed’s monetary policy path. Additionally, the release of the minutes from the Fed’s March meeting at 18:00 GMT is expected to shed further light on their policy stance.


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