**Market Insights: U.S. Dollar Stabilizes Ahead of Inflation Data**

**By Brigid Riley**

**TOKYO (Reuters)** – The U.S. dollar remains below its recent 6-1/2-month high against major currencies, while Bitcoin dipped further from record levels as traders paused to reassess the implications of the recent U.S. presidential election. The market is gearing up for crucial U.S. inflation data due later today, which will significantly influence trading strategies.

The dollar is benefiting from expectations surrounding President-elect Donald Trump’s policies, including potential tax cuts and trade tariffs that are perceived to have inflationary effects. After reaching a high of 106.17 on Tuesday—the strongest level since May 1—the dollar index is currently trading at 106.03, representing a slight 0.04% increase.

With Republicans edging closer to achieving full control of Congress, the prospect of advancing Trump’s economic agenda has led to increased investor confidence, reflected in rising U.S. Treasury yields. However, trading momentum appeared to wane as traders awaited fresh insights from the October Consumer Price Index (CPI) report.

Charu Chanana, chief investment strategist at Saxo, commented, “As traders refocus on inflation metrics and Fed policy this week, the sustainability of current momentum related to Trump trades remains to be evaluated.” The core CPI is anticipated to show an increase of 0.3% for October, which could raise sensitivity to inflation outcomes.

Following the CPI report, Fed Chair Jerome Powell is scheduled to speak, followed by the Producer Price Index (PPI) data on Thursday and retail sales figures on Friday. Current market analysis suggests around a 60% probability of a quarter-point rate cut from the Federal Reserve in December—down from approximately 84% a month prior, according to CME Group’s FedWatch Tool.

Meanwhile, Bitcoin has reversed from its recent peak, trading around $87,450 after an all-time high of $89,998 on Tuesday. Trump’s recent commitment to establishing the U.S. as the “crypto capital of the planet” adds another layer of complexity for traders in the cryptocurrency market.

The dollar also gained ground against the Japanese yen, rising 0.12% to 154.80, following its peak of 154.934—the highest since July 30. Japan’s wholesale inflation figures showed a surge in October, complicating the Bank of Japan’s monetary strategy amid rising import costs due to yen depreciation.

In Europe, the euro struggled near a one-year low, recently tracking down 0.09% at $1.0615, as political uncertainties loom ahead of Germany’s upcoming elections on February 23. This instability, combined with potential tariffs from a Trump administration, continues to weigh on the euro.

The British pound remained stable at $1.27475 but is under pressure from a generally firmer dollar. The offshore yuan traded at 7.2354 per dollar, slightly up by 0.14%.

RBC strategists note that the dollar’s upward momentum is likely not yet exhausted. They believe that Trump’s electoral mandate could enhance the greenback’s strength, despite his preference for a weaker currency. “Many of his proposals are favorable towards dollar appreciation,” they said.

In Australia, the local currency fell 0.05% to $0.6529 amid signs of a slowdown in wage growth, which raises the possibility of interest rate cuts.

As traders anticipate these critical economic releases, careful monitoring of upcoming inflation data will be vital in shaping market strategies for the dollar and other currencies in the foreign exchange arena.

Image by Unsplash via Free Malaysia Today, licensed under CC BY 4.0.