The dollar fell this Wednesday from a three-month high against a basket of currencies, as investors consolidated gains following the previous session’s stronger-than-expected U.S. inflation report that pushed back bets on a first Federal Reserve rate cut to sometime in the middle of the year.
Since Tuesday’s data showed the consumer price index (CPI) gained 3.1% in January from a year earlier, above the expected 2.9% rise, Fed funds futures have not priced in any rate cuts in March and an almost 80% probability of a reduction in June, according to application of probability of LSEG rates.
Futures are also pricing in about three rate cuts of 25 basis points each this year.
The dollar index, which measures the US currency against six other major currencies, fell 0.1% to 104.72 units, after hitting a three-month high of 104.97.
“The strengthening dollar is now the path of least resistance. We do not believe that the time has yet come to fade those movements,” said Vassili Serebriakov, currency strategist at UBS in New York. “But things can change quickly and on Thursday we have retail sales, although we expect a robust number again. That should support the strength of the dollar.”
The dollar weakened against the yen after top currency officials in Japan noticed what they described as rapid and speculative movements in the yen.
The greenback fell 0.2% to 150.52 yen, not far from a three-month high reached against the Japanese currency on Tuesday. The dollar has appreciated about 10 yen since the beginning of the year.
Elsewhere, the pound fell 0.2% to $1.2563, after briefly hitting a more than a week low, after data showed UK inflation did not accelerate in January as expected. This may relieve some of the pressure on the Bank of England (BoE) to keep rates where they are for longer.
Inflation stood at an annual rate of 4.0% in January, unchanged compared to December. Economists consulted by Reuters had forecast an increase of up to 4.2%.
The euro rose 0.2% to $1.0720 amid a flurry of economic data from the euro zone. It previously hit a three-month low of $1.0695.
In the world of cryptocurrencies, Bitcoin rose 4.1% to $51,612, reaching its highest level since December 2021 above $52,000.
Source: Ambito
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