Dollar Pauses Ahead of Key Inflation Report; Bank of America Warns of Tariff Impact
U.S. Dollar Steadies as Markets Await Key Inflation Data
On Wednesday, the U.S. dollar paused its recent rally, with investors turning their attention to the upcoming Consumer Price Index (CPI) report. The dollar had previously strengthened, influenced by recent tariff impositions. Early in the day, it was up 0.3% against the yen but saw modest losses against other currencies, trading at $1.0357 per euro. The euro gained 0.5%, sterling rose 0.7% to $1.2441, and the Australian dollar increased by 0.3% to $0.6294.
The European Union, Mexico, and Canada have condemned President Trump's 25% tariffs on steel and aluminum, with the European Commission considering potential countermeasures. U.S. Federal Reserve Chair Jerome Powell indicated no immediate plans to lower interest rates, citing the economy's strength. Analysts expect a slight increase in core CPI to 0.3% for January, with future rate cuts potentially postponed. The Canadian dollar remained strong, while the Mexican peso and other emerging currencies experienced pressure.
Bank of America Warns of Long-Term Dollar Impact from Tariffs
Analysts at Bank of America have expressed concerns that the imposition of tariffs could have detrimental effects on the U.S. dollar's long-term value. They caution that such trade policies might erode the currency's strength over time.
The bank's strategists highlighted that while there is no immediate trade deficit emergency prompting tariffs, a partial reduction in the risk premium implied by the DXY index is evident. They noted that some tariff risk premium is likely to remain due to ongoing uncertainty. The more pressing short-term risk for the dollar comes from its proximity to CTA stop-loss levels.
In summary, the U.S. dollar's recent performance reflects a complex interplay of factors, including upcoming inflation data and the potential long-term impacts of trade policies. Investors are closely monitoring these developments to assess the future trajectory of the currency.
No Comment to " Dollar Pauses Ahead of Key Inflation Report; Bank of America Warns of Tariff Impact "