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Dollar holds ground after US inflation data release

Dollar holds ground after US inflation data release

On Friday, March 1, the dollar maintains stability following the release of data indicating that inflation in the US is gradually but steadily declining. The report showed that US prices in January increased as expected, and year-over-year inflation continues to slowly decrease, reaching its lowest level in three years.

"The inflation data underscore the importance of the FOMC's caution in making decisions on interest rate normalization, especially in the current conditions of a still-tense labor market," explained experts at the Commonwealth Bank of Australia.

The Federal Reserve System (Fed) uses this inflation indicator to decide when to start reducing interest rates. The Fed is expected to begin cutting rates in June.

The dollar index, which measures the currency against six major world currencies, experienced a volatile session following the release of the inflation data. Eventually, the USD index (DXY) settled at 104.13.

US economic data show a confident economic recovery, and inflation reports confirm stable price pressure, leading traders to reassess the timing of the Fed's interest rate cuts, adjusting forecasts to June.

According to the CME FedWatch Tool, the probability of the Fed cutting rates in June is 66%, although yesterday, before the inflation report was released, the probability stood at 52.6%.

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