Stable Dollar Amid Investor Speculations on Fed Rate Cut Against Surging U.S. Consumer Prices

12 Jan 2024 , 07:45 AM

As investors balanced market bets that the Federal Reserve will lower rates as soon as March against higher-than-expected U.S. consumer price inflation, the dollar remained stable against its peer currencies on Friday.

In December, U.S. consumer prices rose as rents continued their upward trajectory. They jumped by 0.3% for the month and 3.4% annually, exceeding the 0.2% gain and 3.2% rise that experts predicted in a Reuters poll.

Nonetheless, according to the CME Group’s FedWatch Tool, traders are pricing in a 73.2% chance that the first 25 basis point cut will occur in March, with multiple additional cuts to come.

The dollar index was trading at 102.26, down from its peak of 102.76 on Thursday, but still significantly higher than its December low of 100.61, which was reached when speculators started to aggressively price in a spate of Fed cuts for this year.

According to the most recent CPI data, Cleveland Fed President Loretta Mester stated on Thursday that it would probably be too soon for the central bank to lower its policy rate in March.

Thomas Barkin, President of the Richmond Fed, stated at a different occasion that the data did not provide much insight into the direction of inflation.

The euro stayed at $1.0977 after gaining on the dollar the previous day, while sterling was last trading at $1.277, up 0.07% for the day.

The Japanese yen barely moved, closing at 145.27 against the US dollar on Thursday, although it was still above its lowest level since December 11 of 146.41.

In terms of cryptocurrencies, bitcoin was up 0.25% at $46,270.00 as of this writing. It had risen to a two-year high over night after the U.S. Securities and Exchange Commission approved the sale of bitcoin-linked ETFs on Wednesday.

After reaching its highest level since May 2022 at $2690.70 on Thursday, ether somewhat decreased to $2,607.40.

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