US Dollar Surges Ahead of Retail Sales, Inflation Data

In reaction to investors’ anticipation of US retail sales and inflation data this week, which could provide insight into the timing of the Federal Reserve’s much-anticipated interest rate reductions, the dollar saw a little increase against other major currencies on Monday.

Bitcoin reached $50,000 in cryptocurrency for the first time since December 2021 because to investments made in exchange-traded funds that are backed by the virtual commodity. At $50,207, it was recently up 5.6%.

The consumer price index (CPI) for January is expected to offer the Federal Reserve confidence that inflation is slowing down towards its 2% objective, but the dollar index gained 0.1% versus the dollar.

Wall Street analysts predict that the core CPI will have slowed to 3.7% year over year growth in January, and that the year over year CPI will increase by 2.9%, down from 3.4% in the previous month. A decline into the 2s would provide a psychological boost to market mood, even though the headline CPI figure is 2.9%.

The Federal Reserve Bank of New York published its January Survey of Consumer Expectations ahead of the CPI report, indicating 3% and 2.5% inflation in one and five years, respectively. Three years from now, the anticipated increase in inflation fell from 2.6% in December to 2.4%, the lowest level since March 2020.

As we head into Tuesday, the market is feeling pretty positive and is expecting a similar result. On Thursday, retail sales data for January are expected to be released. Economists predict a 0.1% decrease in sales. The euro fell from a 10-day high set in early trading, losing 0.1% vs the dollar to $1.0771. On Wednesday, a reading of the fourth-quarter economic growth in the euro zone could offer new guidance.

Currency markets are currently heavily influenced by shifting expectations about when and how rapidly central banks may lower interest rates in response to declining inflation. A rate decrease by the Fed in March has essentially been ruled out by this month’s strong jobs report; instead, markets now view a move in May as considerably more plausible.