Athen: The dollar dropped against most of its Group-of-10 peers before Federal Reserve Chair Janet Yellen testifies to the Senate Banking Panel in Washington later yesterday, while the pound declined after UK consumer-price inflation data missed economists’ forecasts.
Britain’s annual inflation rate increased 1.8 percent in January, still 0.2 percentage points below the Bank of England’s target and falling short of the 1.9 percent estimated in a Bloomberg survey. Sterling dropped as much 0.7 percent to $1.2444; spot movements in cable remain choppy as conviction on the pair is low among investors while the pound remains sensitive to various headlines, varying from Brexit negotiations, to US politics and price growth.
Talking about inflation, what could be of equal importance to dollar traders along with Yellen’s testimony is the release of US consumer-price data due Wednesday; these risk events have increased costs for those who wish to hedge over one-day euro price swings to the highest in almost two weeks.
Risks on Yellen may be lying on the hawkish side for the greenback even if she just keeps all options open for the Fed. While reflation-trade allure has picked up lately and market implied probability of a March interest-rate hike rose to 30 percent compared to 24 percent a week ago, the dollar has retraced just a fourth of its 2017 drop. Flows Tuesday were mostly muted, with some short-term investors offloading dollar longs, according to Europe-based traders. EUR/USD sees muted flows as it manages to pare large part of Monday losses even after it closed below its 55-DMA for the first time in almost a month; pair largely unfazed by euro area growth and German ZEW data, holds above 1.0600There is mixed interest sub-1.0590, with bids and stops extending down to 1.0570; offering interest by leveraged investors intensifies on order books and gathers around 1.0650, 1.0670-80 and 1.0700, according to traders in Europe
