Dollar Steady Despite Rate Cut Bets

12 Dec 2024 , 09:50 AM

Despite market participants’ bets that the U.S. Federal Reserve will lower interest rates next week, the U.S. dollar remained in a narrow range on Thursday after reaching a two-week high the day before. This was bolstered by an increase in U.S. Treasury yields.

After rising 0.2% for four consecutive months, Wednesday’s consumer price index (CPI) report for November indicated a 0.3% increase, the biggest advance since April.

While the euro remained stable ahead of the European Central Bank’s (ECB) monetary policy announcement later in the day, the Australian dollar rose after the country’s employment exceeded expectations.

A spike in U.S. Treasury yields on Wednesday as the Treasury Department sold long-dated supplies and data indicated a growing U.S. budget deficit helped the dollar hold onto a significant amount of the gains from the previous day.

According to the CME FedWatch tool, the market currently sees a 98.6% chance that the Fed will lower rates by 25 basis points at its meeting on December 17–18, up from 78.1% a week ago.

Later in the day, when the producer price index (PPI) is released, market participants will receive additional U.S. inflation data.

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