The dollar was broadly steady near a six-week high on Thursday, as investors await GDP and other data this week to gauge where U.S. rates are headed, while the euro was soft ahead of the European Central Bank’s policy meeting later in the day.

Data overnight showed U.S. business activity picked up in January and inflation appeared to abate, with a measure of prices charged by companies for their products falling to the lowest level in more than 3-1/2 years.

The dollar index, which measures the U.S. currency against six rivals, rose 0.06% to 103.33 after dropping 0.2% on Tuesday as traders consolidated their positions ahead of the Federal Reserve’s policy meeting next week.

The first reading of U.S. gross domestic product for the fourth quarter is expected to show an economy resilient to the steep interest rate increases, said Carol King, a currency strategist at Commonwealth Bank of Australia (OTC:CMWAY).

“Evidence of still robust US economic activity, against the backdrop of weak European and Chinese growth, can keep the USD supported in our view,” she said.

Economists polled by Reuters expect fourth-quarter U.S. GDP to have increased at a 2% annualized rate.

Other U.S. data this week includes the Fed’s favourite gauge of inflation – the personal consumption expenditure (PCE) data – on Friday.

Next week, the Fed is widely expected to stand pat but comments from Chair Jerome Powell will be intensely scrutinized to assess if the U.S. central bank is ready to start cutting interest rates.

Traders have drastically scaled back bets on early and deep rate cuts. Markets are currently pricing in a 41% chance of a cut in March, the CME FedWatch tool shows, down from 88% a month ago.

Traders are also pricing in 130 basis points of cuts this year compared to 160 bps at the end of 2023.

In Asia, the offshore Chinese yuan rose 0.06% to $7.1648 per dollar.

China’s central bank on Wednesday announced a deep cut to bank reserves, a move that will inject about $140 billion of cash into the banking system and send a strong signal of support for a fragile economy and plunging stock markets.

The move comes after a report earlier this week of a rescue package worth $278 billion to help stabilise the battered stock markets.

“While these measures are likely to support the yuan and wider market sentiment in the short term, it is unlikely to be a silver bullet,” said Kieran Williams, head of Asia FX at InTouch Capital Markets.

“The outlook for the yuan is heavily dependent on investor sentiment, and without some kind of MLF/LPR reduction, the real rate remains high and confidence issues will linger.”

The Japanese yen weakened 0.16% to 147.75 per dollar, giving back some of its gains from Wednesday as traders took note of the Bank of Japan’s hawkish tilt.

Bank of Japan chief Kazuo Ueda said on Tuesday the prospects of achieving the central bank’s inflation target were gradually increasing, adding to expectations that the country might soon leave behind its ultra-loose monetary policy.

Meanwhile, the euro was down 0.07% to $1.0875 ahead of the ECB policy meeting, where the central bank is expected to keep rates steady and the focus is on comments from officials.

The ECB ended its quickest rate hiking cycle in September but has been adamant that even discussing a reversal would be premature since price pressures have yet to be fully extinguished and crucial wage talks remain ongoing.

Markets are pricing in 130 bps of cuts from the ECB this year.

The Australian dollar eased 0.09% to $0.657, while the New Zealand dollar fell 0.11% to $0.610. Sterling was last at $1.2706, down 0.13% on the day.

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