FX.co ★ Dollar Holds Steady Ahead of CPI

The dollar index was little changed around 97 on Friday, trading sideways for a fourth consecutive session as investors awaited the January consumer price index release, a key input for shaping expectations on Federal Reserve policy. Consensus forecasts point to headline inflation easing to 2.5% from 2.7%, with core inflation edging down to 2.5% from 2.6%.

Earlier in the week, stronger-than-expected US nonfarm payrolls underscored the resilience of the labor market, though the latest weekly jobless claims exceeded projections. Futures markets currently anticipate that the Fed will leave interest rates unchanged in March, while pricing in two 25-basis-point cuts later in the year, one in June and another in September.

On a weekly basis, the dollar is poised to lose more than 2% against the yen, pressured by Prime Minister Sanae Takaichi’s decisive election victory and renewed verbal intervention from Japanese authorities. The Australian dollar also advanced notably, supported by hawkish signals from the Reserve Bank of Australia.