Dollar Flat after Fed Official Comments, Focus on CPI Data Next Week

Asian stocks retreated on Monday as investors remained cautious ahead of the Federal Reserve's upcoming policy meeting and concerns over a potential rate hike. The uncertainty over the future of monetary policy led to a decline in risk appetite and resulted in a decline in equity markets across the region.

Despite the overall decline in the market, Chinese stocks outperformed their regional peers, with the Shanghai Composite index rising 0.5% and the Shenzhen Component index increasing 1.2%. The better-than-expected performance of Chinese stocks can be attributed to the country's strong economic growth, which continues to attract investment despite the uncertainty in the global market.

The decline in risk appetite was also reflected in the currency market, with the safe-haven Japanese yen strengthening against the U.S. dollar. The Australian and New Zealand dollars, which are highly sensitive to changes in risk sentiment, also declined against the greenback.

The upcoming Federal Reserve policy meeting, which is set to take place on March 16-17, is a key event for markets as investors await clarification on the central bank's monetary policy stance. The uncertainty over the future of monetary policy has led to a decline in risk sentiment, as investors fear that a potential rate hike could slow down economic growth.

Dollar remains steady

The U.S. dollar was mostly unchanged on Thursday after comments from a Federal Reserve official added to uncertainty over the central bank's monetary policy stance. The greenback had been under pressure in recent days due to concerns over the future of monetary policy and the potential for a rate hike.

As a result of the remarks made by Vice Chairman Richard Clarida, the situation became more uncertain, as he indicated that the central bank was closely monitoring inflation and would act as necessary to achieve its goals. The remarks led to a decline in risk sentiment and a temporary slowdown in the U.S. dollar's recent rally.

Investors will now turn their attention to the upcoming release of the Consumer Price Index (CPI) data next week, which is expected to provide further insight into the future of monetary policy. The Fed has indicated that it will continue to keep a close eye on inflation, and the CPI data will be a key factor in determining the central bank's future monetary policy stance.

Key events of the day

The market is buzzing on Thursday with anticipation of a full day of economic announcements.

Starting off with the German Consumer Price Index (CPI), it's expected to come in at 8.9% YoY, a slight increase from the previous 8.6%. Meanwhile, the MoM figure is forecasted to be 0.8%.

Next up, the Swedish central bank will announce its interest rate decision. It's expected to hold steady at 3.00%.

At 12 PM GMT, the EU Economic Forecasts and the EU Leaders Summit will take place. These events could bring about significant market movements and should not be overlooked.

In South Africa, the Manufacturing Production YoY figures for December are expected to be negative at -2.5%, a decline from the previous -1.1%. Meanwhile, in Mexico, the Consumer Price Index (CPI) is expected to come in at 7.89% YoY, a slight increase from the previous 7.82%.

Moving on to Brazil, the CPI figures for January are expected to come in at 0.51% MoM and 5.79% YoY. Retail Sales figures for December are forecasted to decline slightly to -0.7% MoM, but the YoY figure is expected to increase to 2.4%.

In the US, the Initial Jobless Claims figure is expected to come in at 190K.

The day will conclude with a string of speeches, including German Buba President Nagel, ECB's De Guindos, and Mexico's Interest Rate Decision, which is expected to hold steady at 10.75%.