Asian session review: the US dollar stabilized against major currencies

During today's Asian trading, the US dollar consolidated against major currencies as investors remain cautious ahead of the release of US inflation data.

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 0.02% to 105.57 (2-week low). Friday's key event will be the publication of the personal consumption expenditures price index, the Fed's preferred inflation indicator. The spending data for February was a reminder that the American consumer should not be underestimated. Spending increased by 0.8% on the back of the strongest monthly growth in service costs in more than a year and a half. Spending is expected to rise again in March, as a jump in retail sales indicates an increase in spending on goods, which should help offset some slowdown in growth in the service sector. Spending was supported by consumers' willingness to save less for savings, as well as significant wage growth. Another month of active hiring and increased income indicates that spending, supported by labor income, continued in March - total personal income is expected to have increased by 0.5% last month. However, inflation, as measured by the PCE deflator, seems to have remained stable again, which limits the possibility of nominal income growth. According to economists, overall PCE inflation increased in March by 0.3% m/m and 2.6% per annum. Overall, slower progress in reducing inflation, along with moderate recruitment, is expected to put pressure on both real incomes and consumer spending during the year.

The yen fell 0.5% against the US dollar, again updating its 34-year low, which was caused by the results of the Bank of Japan meeting. The central bank unexpectedly voted to keep the target short-term interest rate in the range of 0-0.1%. Investors had not expected a policy shift but took the decision as confirmation that only small moves lie ahead. The central bank said that inflation is likely to remain near the target level (2%) for the next three years. According to the updated forecasts, core consumer inflation will reach 2.8% in the year ending in March 2025 (previous forecast: 2.4%). The central bank also expects the core CPI to rise by 1.9% in the year ending March 2026 and the following year. As for the economic outlook, forecasts suggest GDP growth of 0.8% in the current fiscal year (previous forecast: 1.2%) and 1% in the year ending in March 2026 and next year. Some economists expect the Central Bank to raise interest rates again this summer, as the weakness of the yen is likely to increase inflationary pressures due to higher import prices for energy and food.