U.S. dollar remained steady due to rising inflation

The U.S. dollar was steady in early European trading on Thursday. A surprisingly large rise in U.S. consumer prices bolstered inflation fears, causing the currency to strengthen in the previous session.

According to the data, U.S. consumer prices skyrocketed by the most in almost 12 years in April. Such a report sparked a risk-off move in global markets. As a result, equities and riskier currencies tumbled down, and U.S. Treasury yields soared.

Investors are now waiting for U.S. weekly jobless claims due later today, along with retail sales numbers due on Friday, for additional clues about whether upward pressure on prices will persist.

On Wednesday, U.S. Federal Reserve Vice Chair Richard Clarida stated that thus far, weak job growth and strong inflation in April had not prompted the central bank to change its loose monetary policy.

The dollar index traded steady at 90.734 on Thursday, a bit lower from Wednesday’s high of 90.798. According to ING strategists, risk-averse currency market moves most likely wouldn’t persist. They added that the dollar index would probably weaken back below 90 in the coming weeks.

ING also noted that surging prices are a clear phenomenon around the globe. The analysts agree that the Federal Reserve will have to raise rates earlier than it currently indicates; however, an imminent tightening from the Fed seems unlikely.

How did the other currencies fare on Thursday?

The Australian dollar tumbled down by 0.3% at 0.77055 against the dollar on Thursday, extending losses after experiencing its biggest daily plunge since March on Wednesday.

On the other hand, the New Zealand dollar briefly soared after Prime Minister Jacinda Ardern announced she was contemplating quarantine-free travel with other countries. Despite that, the kiwi traded lower by 0.2%, at last.

The euro climbed up by 0.1% at $1.2084, while the Japanese yen traded flat versus the dollar. The pair changed hands at 109.675 on Thursday.