US Dollar still under pressure ahead of CPI data

The US Dollar performs negatively on Tuesday and weakens against its major rivals as investors gear up for the highly anticipated March Consumer Price Index (CPI) data from the US. The US Dollar Index, which closed the previous four trading days in positive territory, retreats toward 102.00, reflecting the lack of demand for the currency.

Previewing the potential impact of the US CPI data on the USD, “the USD’s downtrend could stall a bit in the short-term, aided by the expectations of another Fed hike next month. However, much will hinge on the near-term data releases, especially the March CPI print.

Ahead of the weekend, the USD gathered strength as investors started to price in a 25 basis points US Federal Reserve rate hike in May on the back of the upbeat March jobs report.

With trading conditions normalizing after a long weekend, however, US Treasury bond yields started to push lower, making it difficult for the USD to continue to outperform its peers. Moreover, the improving risk mood seems to be putting additional weight on the USD’s shoulders.

Nonfarm Payrolls in the US rose by 236,000 in March, slightly below the market expectation of 240,000. February’s print of 311,000 got revised higher to 326,000 from 311,000.

Wage inflation in the US, as measured by Average Hourly Earnings, declined to 4.2% on a yearly basis from 4.6% in February. The Unemployment Rate ticked down to 3.5% with the Labor Force Participation Rate improving to 62.6% from 62.5%.

NY Fed President John Williams argued on Monday that the pace of Fed rate increases was not behind the issues surrounding the two collapsed banks back in March. On Tuesday, Williams acknowledged that they will have to lower rates if inflation were to come down.