Forex Today: Dollar selloff pauses ahead of key US inflation data

Here is what you need to know on Thursday, March 31:

Despite the risk-averse market atmosphere, the dollar continued to weaken against its rivals on Wednesday and the US Dollar Index fell more than 0.5% before going into a consolidation phase early Thursday. The US Bureau of Economic Analysis will release the Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred gauge of inflation, for February alongside Personal Income and Personal Spending Figures. The weekly Initial Jobless Claims will also be featured in the US economic docket. In the second half of the day, month/quarter-end flows could also cause the market volatility to rise. Finally, the OPEC’s full ministerial meeting will take place later in the day.

US February PCE Inflation Preview: Will inflation data confirm 50 bps May hike?

Although markets became hopeful for a diplomatic solution to the Russia-Ukraine conflict after Tuesday’s talks, Wednesday’s headlines forced investors to turn cautious. A spokesperson for Kremlin said that they have not noticed anything that could be assessed as a “breakthrough” in their negotiations with Ukraine. Ukraine's Defense Ministry noted that Russian forces were preparing to resume offensive operations and the Pentagon stated Russia was beginning to reposition about only 20% of the troops it has arrayed around Kyiv.

Earlier in the day, the data from China showed that the business activity in the manufacturing and service sectors contracted in March. AUD/USD and NZD/USD pairs came under modest bearish pressure after these data and edged lower during the Asian trading hours.

For the fourth consecutive day on Thursday, the Bank of Japan (BOJ) conducted an unlimited buying of 10-year Japanese government bonds (JGBs) at 0.25%. After closing the previous two trading days in the negative territory, USD/JPY edged higher during the Asian trading hours but fell back below 122.00 in the European morning.

GBP/USD retreated toward 1.3100 earlier in the day but regained its traction on upbeat data. The UK's Office for National Statistics reported Thursday that the Gross Domestic Product expanded by 6.6% on a yearly basis in the fourth quarter, surpassing the flash estimate and the market expectation of 6.5%.

EUR/USD clings to modest daily gains above 1.1150 early Thursday after managing to post impressive gains in the previous two days. Germany's Destatis announced that Retail Sales rose by 0.3% on a monthly basis in February, compared to analysts' estimate of 0.5%.

Gold declined toward $1,920 during the Asian session on Thursday but erased a portion of its daily losses with the benchmark 10-year US Treasury bond yield turning south and losing nearly 1% on the day.

Bitcoin continues to fluctuate in a narrow range near $47,000 for the second straight day on Thursday. Ethereum struggled to find direction on Wednesday and stays relatively quiet at around $3,400 early Thursday.