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Asian session review: the US dollar stabilized against major currencies

During today's Asian trading, the US dollar consolidated against major currencies, as market participants were cautious ahead of the publication of a lot of US data that could affect the prospects for easing the Fed's monetary policy.

The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.05% to 103.88. One of the key events of this week will be the publication of the core personal consumption expenditures (PCE) price index - the Fed's preferred measure of inflation. Economists expect core PCE to grow by 0.4% in January compared to December and by 2.8% per annum. Together with core PCE, a report on personal income and spending will also be presented. Consensus estimates suggest that personal income increased by 0.4% in January after an increase of 0.3% in December, and personal spending rose by 0.2% after an increase of 0.7%. If the data exceeds expectations, it would further push back expectations for a slew of Fed cuts this year. According to the CME FedWatch Tool, markets see a 20.8% probability of a 25 basis point rate cut at the Fed meeting in May, and a 66.1% probability of a rate cut in June, with approximately 80 basis points of cuts priced in for this year.

The New Zealand dollar fell 0.4% against the US dollar as investors adjusted positions ahead of the announcement of the results of the Reserve Bank of New Zealand meeting (on Wednesday). Overall, most economists expect the Central Bank to leave the interest rate at 5.5%, but there is a risk of further depreciation of the New Zealand dollar if markets unwind pricing for a near-term rate hike.

The yen rose 0.1% against the US dollar, while investors are preparing for the publication of Japanese inflation data (today at 23:30 GMT). According to forecasts, the core CPI rose by 1.8% per annum in January (the weakest growth since March 2022) after an increase of 2.3% per annum in December. If this forecast is confirmed, it will complicate the Bank of Japan's plans to end negative interest rates in the coming months, which is likely to put pressure on the yen in the near future.

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