- The US November year-on-year core CPI increase was seen to moderate
- Focus on killing central bank meetings led by the Fed
- The Fed is widely expected to raise interest rates by 50 bps
- The dollar gave up gains in the 1st 3 quarters in 2 months – analyst
LONDON/NEW YORK, Dec 12 (Reuters) – The dollar fell on Monday in thin trading as investors priced in lower U.S. consumer price inflation numbers for November and a Federal Reserve likely will slow its pace of rate hikes at the end of its two-day policy meeting on Wednesday.
Consumer inflation data for November lands on Tuesday and is expected to show a 6.1% increase in the core reading on a year-over-year basis, which excludes food and energy prices, from 6.3% in October.
In late morning trading, the euro rose 0.1% against the dollar to $1.0546. The single European currency has gained nearly 8% so far in the fourth quarter, as investors have previously banked on the European Central Bank staying on a course of aggressive rate hikes.
The dollar was little changed against the Swiss franc at 0.9348 francs.
Against the yen, however, the dollar rose 0.5% to 137.24.
The dollar index, which measures the greenback’s value against six major currencies, fell 0.1% to 104.92.
“The weaker dollar signals that the market is seeing lower inflation and it’s hearing what (Fed Chair Jerome) Powell has said that the Fed is cutting the pace of its rate hikes and the market is pricing in everything,” he said. by Joe Perry, senior market analyst at FOREX.com and City Index in New York.
He added that the dollar index rose on Sept. 28 and arrived around 104.70, which is the 50% retracement from the low to the high of the year, and is also the 200-day moving average.
“So it’s interesting that what got us through the first three quarters to get that high, we gave it up in two months,” Perry said.
This week is one of the most macro-packed so far this year, with the four major central banks holding their last policy meetings of 2022.
The Federal Reserve, the European Central Bank, the Bank of England and the Swiss National Bank will all release rate decisions this week.
The Fed is widely expected to deliver a rate hike of 50 basis points (bps) after a series of 75-basis-point hikes, especially given the tightness of the US labor market and a rationally reformed economy.
“Because the FOMC is so close, (consumer inflation data) clearly has the ability to change the tone of the message, the statement and the dot plots, but it is unlikely to change the headline 50bps hike, ” Jim Reid, head. of thematic research at Deutsche Bank, wrote a research note.
The dollar briefly rose as much as 0.5% against the pound after data showed the UK economy recovered in October from a public holiday for Queen Elizabeth’s funeral, but still pointed to a bleak outlook.
Sterling was finally up 0.2% at $1.2283, having fallen to a session low of $1.2207, and was little changed against a single European currency at 86.03 pence per euro.
The offshore Chinese yuan fell 0.1% against the US currency to 6.983 per dollar, further pressured by concerns over a potential rise in COVID cases as China eases strict COVID-19 restrictions. 19.
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Currency bid price at 10:39AM (1539 GMT)
Reporting by Amanda Cooper in London and Gertrude Chavez-Dreyfuss; Additional reporting by Rae Wee in Singapore; Editing by Lincoln Feast, Bradley Perrett, Christian Schmollinger and Mark Heinrich
Our Standards: The Thomson Reuters Trust Principles.