By Geoffrey Smith
Investing.com — The dollar was up in early trading as the market adjusted its view of the likely path for U.S. interest rates again in the wake of February’s inflation report on Tuesday.
The U.S.
consumer price index
had fallen to 6.0%, but core elements of the report continued to show prices rising at an uncomfortably fast rate, illustrating the Federal Reserve’s lack of room for maneuver to respond to last week’s banking failures.
Rate-sensitive two-year bond yields had retraced around two-thirds of their Monday drop in response, as the market settled once again into a consensus that the Fed will
raise interest rate
s by 25 basis points at its meeting next week, not least because failing to do so would likely be interpreted as panicking and as such, unlikely to restore confidence in the U.S. banking sector.
By 04:00 ET (08:00 GMT), the
dollar index
, which measures the greenback against a basket of advanced economy currencies, was up 0.1 at 103.30, having dropped as low as 103.00 during a four-day plunge.
The CPI report is set to be followed at 08:30 ET Wednesday by data on U.S.
retail sales
and
producer price inflation
for February, which will also be influential inputs for the Fed’s decision next week.
In Europe, the euro is outperforming after Reuters reported that the European Central Bank is set to stick with its plans to raise its key
rates
by 50 basis points when it meets on Thursday, with its sources saying that a new set of staff forecasts will still show inflation above its 2% target in 2025.
That point was underlined by the publication of French inflation data for February, which were revised up to show a rise of 1.1% in prices last month, taking the
annual rate
of inflation in the Eurozone’s second-largest economy back up to 7.3%
The
euro
rose as high as $1.0760, its highest since mid-February, before retracing to be at $1.0735, up 0.1% from late Tuesday.
Elsewhere in Europe,
sterling
came under pressure again ahead of the U.K. government’s new budget, which is expected to focus on measures to improve labor supply. The U.K. has the highest level of economic inactivity among G7 countries, due largely to long-term absenteeism and a rise in early retirement during the pandemic.
Elsewhere, the
offshore yuan
edged down after a mixed set of data for
industrial production
,
retail sales
and
fixed asset investment
in February.
