- US producer prices increased more than anticipated last month.
- Markets are awaiting several important central bank meetings and releasing the latest US inflation figures.
- The BoE and the European Central Bank are expected to announce 50 bp rate increases.
Currency futures fell as the dollar increased on Monday after data on Friday revealed that US producer prices had increased more than anticipated last month. It indicated ongoing inflationary pressures and raised the possibility that the Federal Reserve would maintain higher interest rates for longer.
The dollar increased 0.35 percent to 137.05 Japanese yen, causing a drop in yen futures. The US dollar index managed a 0.12% rise against a basket of currencies, closing at 105.18.
Euro futures last traded at $1.0509, down 0.2%.
On Monday, pound futures dropped 0.31% to $1.2229, and Australian dollar futures dipped 0.34% to $0.6773. Similarly, kiwi futures fell 0.34% to $0.6393.
Concerns regarding a potential increase in COVID cases as China relaxes its rigorous COVID-19 regulations caused the offshore yuan to weaken marginally to 6.9798 per dollar.
Data released on Friday revealed that the US producer price index for final demand in November increased 0.3% from the previous month and 7.4% annually, slightly exceeding expectations for increases of 0.2% and 7.2%, respectively.
Several important central bank meetings and releasing the latest US inflation figures this week are among the big risk events keeping traders on edge.
Although attention will be on the Federal Reserve’s revised economic projections and press conference led by Fed Chair Jerome Powell, the Fed will again take the spotlight and is largely expected to raise interest rates by 50 basis points.
The European Central Bank (ECB) and the Bank of England will meet this week, and each is anticipated to announce a 50 bp rate increase.
The US inflation data for November is due on Tuesday ahead of the FOMC meeting, and analysts anticipate a core annual inflation of 6.1%.
According to analysts at Barclays, the market response to US inflation surprises has been lopsided so far in 2022, with downside surprises having a stronger effect than upside ones.
Regarding factors affecting the US currency, they continued, “The inflation print will likely be the stronger driver of the two, (given) the Fed’s stance toward lower hikes.”