Dollar firm after inflation data douse bets for big Fed cut

Home Business Dollar firm after inflation data douse bets for big Fed cut 12-09-2024 10:52 AM Ammon News - The dollar traded near a four-week high versus the euro on Thursday after signs of some stickiness in U.S. inflation reinforced expectations that the Federal Reserve would avoid a super-sized interest rate cut next week. Meanwhile, a quarter-point rate reduction from the European Central Bank (ECB) is widely expected later in the day, with investors anxious for hints on how soon the monetary authority will cut again. The dollar gained against the yen, following a turbulent session the previous day that saw the U.S. currency slide as much as 1.24% to the lowest this year before recovering all its losses after the consumer price data. The dollar rose 0.31% to 142.805 yen as of 0505 GMT, after earlier gaining as much as 0.41%. It dipped as low as 140.71 for the first time since Dec. 28 in the prior session, following Nakagawa's comments. The pair tends to track U.S. long-term Treasury yields, which bounced back forcefully after dipping to a 15-month low of 3.605% on Wednesday, and were ticking up in Asian time on Thursday to last stand at 3.6646%. The U.S. consumer price index (CPI) rose 0.2% last month, matching the advance in July. Excluding the volatile food and energy components, however, the gauge climbed 0.3%, accelerating from the previous month's 0.2% increase. As a result, traders essentially priced out the chances of a 50-basis point (bp) rate cut on Sept. 18, paring the odds to 15% versus 85% probability for a 25-bp reduction. There are still 104 bps of cuts priced by year-end though, meaning markets expect a 50-bp cut at either the November or December meeting. The euro was flat at $1.10165, sticking close to Wednesday's low of $1.1002, the weakest since Aug. 16. Sterling was steady at $1.3050, after dipping as far as $1.30025 in the previous session for the first time since Aug. 20. The Swiss franc was on the back foot, with the dollar gaining 0.11% to 0.8531 franc, after touching the highest since Aug. 21 at 0.8544 franc on Wednesday. The risk-sensitive Australian and New Zealand dollars firmed as Asian stocks tracked gains on Wall Street. The Aussie added 0.22% to $0.6690, while New Zealand's kiwi climbed 0.23% to $0.6152. Reuters

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Dollar firm after inflation data douse bets for big Fed cut

12-09-2024 10:52 AM

Ammon News - The dollar traded near a four-week high versus the euro on Thursday after signs of some stickiness in U.S. inflation reinforced expectations that the Federal Reserve would avoid a super-sized interest rate cut next week.

Meanwhile, a quarter-point rate reduction from the European Central Bank (ECB) is widely expected later in the day, with investors anxious for hints on how soon the monetary authority will cut again.

The dollar gained against the yen, following a turbulent session the previous day that saw the U.S. currency slide as much as 1.24% to the lowest this year before recovering all its losses after the consumer price data.

The dollar rose 0.31% to 142.805 yen as of 0505 GMT, after earlier gaining as much as 0.41%. It dipped as low as 140.71 for the first time since Dec. 28 in the prior session, following Nakagawa's comments.

The pair tends to track U.S. long-term Treasury yields, which bounced back forcefully after dipping to a 15-month low of 3.605% on Wednesday, and were ticking up in Asian time on Thursday to last stand at 3.6646%.

The U.S. consumer price index (CPI) rose 0.2% last month, matching the advance in July. Excluding the volatile food and energy components, however, the gauge climbed 0.3%, accelerating from the previous month's 0.2% increase.

As a result, traders essentially priced out the chances of a 50-basis point (bp) rate cut on Sept. 18, paring the odds to 15% versus 85% probability for a 25-bp reduction.

There are still 104 bps of cuts priced by year-end though, meaning markets expect a 50-bp cut at either the November or December meeting.

The euro was flat at $1.10165, sticking close to Wednesday's low of $1.1002, the weakest since Aug. 16.

Sterling was steady at $1.3050, after dipping as far as $1.30025 in the previous session for the first time since Aug. 20.

The Swiss franc was on the back foot, with the dollar gaining 0.11% to 0.8531 franc, after touching the highest since Aug. 21 at 0.8544 franc on Wednesday.

The risk-sensitive Australian and New Zealand dollars firmed as Asian stocks tracked gains on Wall Street.

The Aussie added 0.22% to $0.6690, while New Zealand's kiwi climbed 0.23% to $0.6152.

Reuters

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