Title: Dollar bides time before U.S. CPI; euro stabilizes after ECB pushback

Feb 09, 2022 02:00 AM ET

By: AnalysisWatch

The dollar remained in a holding pattern on Wednesday, a day ahead of the release of US consumer price data that could provide fresh insight into the pace of Federal Reserve policy tightening.

The euro appeared to regain its footing after bouncing back from a near three-month high earlier this week after European Central Bank President Christine Lagarde downplayed expectations of aggressive rate hikes.

The Australian dollar received some lift as continued gains in global equity markets boosted risk appetite.

The euro was virtually unchanged at $1.14195 after gradually retreating from a peak of $1.1483 on Friday, its highest level since November 11.

The dollar index, which measures the greenback against six major peers including Europe's single currency, was also little changed at 95.587, having recovered from a 2-1/2-week low of 95.136 hit on Friday. Late last month, it hit 97.441, its highest level since June 2020.

Markets were caught off guard last week by more aggressive tones from both the ECB and the Fed, sending yields on euro-area and US debt soaring in anticipation of faster and higher rate hikes than previously expected.

Lagarde said on Monday there was no need for a full-scale tightening of monetary policy, seeking to dampen rising expectations of aggressive action after she opened the door last week to a possible rate hike this year.

Consumer prices probably rose 7.3 percent year-on-year in January, economists polled by Reuters said they would see in US data on Thursday.

The dollar peaked at 115.69 yen before settling at 115.50.

The Australian dollar gained 0.17% to $0.7156, while sterling rose 0.07% to $1.3555.