TOKYO: The US dollar held firm on Friday after rising overnight, as traders weighed how domestic GDP data that surprised to the upside would impact the Federal Reserve’s rate path and awaited key inflation data later in the day.
The euro, meanwhile, was on the backfoot following the European Central Bank’s (ECB) latest monetary policy meeting on Thursday which held interest rates at a record-high 4%.
In the United States, official data on advance GDP estimate showed gross domestic product in the last quarter increased at a 3.3% annualized rate, overshooting the consensus forecast of 2% growth rate. It also showed inflation pressures subsiding further.
“US GDP data re-affirmed soft landing hopes for the US economy, but the bond market focused more on the disinflation component of the report which pushed yields lower.
The dollar, however, held up,“ said Charu Chanana, head of currency strategy at Saxo in Singapore.
The dollar index, which measures the greenback against a basket of major currencies, hovered around 103.52 after climbing about 0.2% overnight.
It’s gained about 2% so far this year. US Treasury yields slid, with the benchmark 10-year yield down at 4.11% in the Asian morning.
Markets are betting there’s a 50% chance of a rate cut in March, according to the CME FedWatch tool, down from 75.6% a month ago.
“Pressure on yields and dollar could increase if December PCE comes in softer than expectations today,” Chanana added.
The euro was last $1.0841, after slipping to a six-week low of $1.08215 on Thursday.
Dollar steady near 6-weeek highs ahead of US GDP; eyes on ECB meeting
The ECB stood pat at its policy meeting on Thursday as expected, although traders piled on bets that the bank will cut interest rates from April as they interpreted policymakers are growing more comfortable with the inflation outlook.