The US dollar index or it is also known as DXY briefly subsided in yesterday's trading. However, managed to recover to the level of 104.96 in the middle of the New York session yesterday. 

The United States dollar also strengthened again moderately in all major currency pairs. It was supported by unemployment claims data and comments by Fed officials.

The number of jobless claims for the week ended February 25, 2023 only increased by 190k. This figure is lower than the 192k increase in the previous period, while also below the consensus estimate pegged at 195k. 

Combined with a significant rise in the United States Manufacturing PMI price sub-index yesterday, the report provided a rebound base for the US dollar. 

People Expect the Fed’s Peak Rate Hike is in September 

The reason for the situation above is that labor market conditions and tight price increases may urge the Fed to raise interest rates higher than previously thought. Several predictions are made by people. 

The majority of market participants now expect the Fed's interest rate to peak in the range of 5.5%-5.75% by September 2023. In fact, the Fed's previous dot plot scheme only predicted a rise of about 5.1% by the middle of the year.

Hawkish rhetoric from a number of Fed officials also dashed expectations of the interest rate. Minneapolis Fed President Neel Kashkari thinks a higher-than-expected rate hike (5.4%) would be appropriate to lower inflation. 

Meanwhile, the President of the Atlanta Federal Reserve, Raphael Bostic, stated that interest rates need to be in the range of 5.0%-5.25%. That must be until 2024 in order to control the rate of inflation without causing a recession. 

Non Manufacturing PMI Data Release is the Next focus

Market participants will next monitor the release of Non-Manufacturing PMI data by ISM. Usually, This data has a greater impact than the Manufacturing PMI. 

In addition, other data related to the labor market and inflation rate will continue to attract attention. It is probably until the next Fed meeting on March 21-22, 2023. 

Elsewhere, the The euro briefly strengthened quite rapidly, but retreated again in trading on Thursday (2/March). It was following the release of the latest Eurozone inflation data in the European session. 

The EUR/USD is circulating in the 1.0610s as it enters the New York session, moving away from the weekly highs reached yesterday. A series of regional data released separately yesterday showed accelerated inflation rates in France and Spain. 

Germany Inflation Rate Remained at 8.7%

Germany's inflation rate in February also remained at 8.7% for year-over-Year as in January. Such a situation has raised market expectations for an increase in the European Central Bank (ECB) interest rate.

Meanwhile, that condition also soaring EUR/USD. Unfortunately, today's Eurozone inflation report shows a sustained downward trend even though the pace did exceed expectations. 

Eurostat reports that the Eurozone inflation rate reaches 8.5% For year-over-Year as of February 2023. This figure is higher than the consensus estimate of only 8.2%.

ECB may Continues It’s Planned Rate Hike

However, the number above slowed down compared to the 8.6% increase in the previous period. Eurozone inflation data like this allows the ECB to continue its planned rate hike. 

But, the data dampened speculation of some market participants who expected higher terminal interest peaks. Inflation is obviously higher than expected, but it may not be as bad as feared.

It was given that expectations have shifted following national data in recent days. This statement was said by Ben Laidler, a Global Market Strategist at eToro London.

He also thinks that the basic scenario is for the ECB to continue the pace of rate hikes By the magnitude of 50 basis points, which actually remains quite hawkish for the market.