The CPI becomes relevant
Currency market movements have been limited this week, with all attention focused on Wednesday’s release of U.S. consumer inflation data for November, as it is likely to provide more information regarding the Federal Reserve’s interest rate path.
The report is expected to reveal that the annual headline figure rose to 2.7% in November, up from 2.6% last month, while the “core” figure, which does not take into account volatile components such as energy and food, is expected to come in at 3.3%, unchanged from October.
The Federal Reserve has cut interest rates by about 75 basis points since September and markets are awaiting another 25 basis point cut at the meeting scheduled for December 17-18.
However, any signs of progress on the Fed’s return of inflation to its 2% target have caused markets to revise their expectations.
“We doubt investors will want to move the DXY too far lower ahead of tomorrow’s US CPI release and would expect 105.40/60 support to hold into the close,” ING analysts say in a note.
Euro loses ground ahead of ECB meeting
In Europe, EUR/USD was down 0.2% at 1.0530 after German inflation remained flat at 2.4% in November, confirming preliminary data, ahead of next Thursday’s European Central Bank meeting at its last meeting of 2024.
The ECB is expected to agree to another rate cut of 25 basis points, the fourth this year.
This cut appears to be a reality for the market, ING said, but “the press conference may open the debate for more cuts later, implying a dovish outcome for the EUR.”
GBP/USD traded flat at 1.2748, with sterling holding up after data showed that job vacancies dried up faster in the U.K. than in other similar countries over the previous year.
Data from recruitment platform Indeed showed that there were 23% fewer jobs posted on its platform in Britain as of November 29 in contrast to a year earlier, adding to signs of a loss of momentum in the British economy in the second half of this year.
The Bank of England cut rates in November for the second time in 2024, and is expected to ease monetary policy more slowly than its main rivals in 2025.
Australia’s dollar close to four-month lows
USD/AUD nears four-month lows after the Reserve Bank of Australia left interest rates unchanged at 4.35% at its December policy meeting, citing stable underlying inflation and labor market tightness.
USD/CNY rose to 7.2612 after disappointing trade data from China. While the country’s trade balance increased in November, both exports and imports were weaker than expected.
China is targeting more dynamic fiscal stimulus measures and moderately accommodative monetary policies in 2025, and the focus now turns to China’s Central Economic Work Conference, which is set to begin on Wednesday.
USD/JPY was up 0.3% to settle at 151.59, after earlier rising to 151.71 for the first time since November 28.Dollar rises on expectations of CPI; Euro eyes ECB meeting
The CPI becomes relevant
Currency market movements have been limited this week, with all attention focused on Wednesday’s release of U.S. consumer inflation data for November, as it is likely to provide more information regarding the Federal Reserve’s interest rate path.
The report is expected to reveal that the annual headline figure rose to 2.7% in November, up from 2.6% last month, while the “core” figure, which does not take into account volatile components such as energy and food, is expected to come in at 3.3%, unchanged from October.
The Federal Reserve has cut interest rates by about 75 basis points since September and markets are awaiting another 25 basis point cut at the meeting scheduled for December 17-18.
However, any signs of progress on the Fed’s return of inflation to its 2% target have caused markets to revise their expectations.
“We doubt investors will want to move the DXY too far lower ahead of tomorrow’s US CPI release and would expect 105.40/60 support to hold into the close,” ING analysts say in a note.
Euro loses ground ahead of ECB meeting
In Europe, EUR/USD was down 0.2% at 1.0530 after German inflation remained flat at 2.4% in November, confirming preliminary data, ahead of next Thursday’s European Central Bank meeting at its last meeting of 2024.
The ECB is expected to agree to another rate cut of 25 basis points, the fourth this year.
This cut appears to be a reality for the market, ING said, but “the press conference may open the debate for more cuts later, implying a dovish outcome for the EUR.”
GBP/USD traded flat at 1.2748, with sterling holding up after data showed that job vacancies dried up faster in the U.K. than in other similar countries over the previous year.
Data from recruitment platform Indeed showed that there were 23% fewer jobs posted on its platform in Britain as of November 29 in contrast to a year earlier, adding to signs of a loss of momentum in the British economy in the second half of this year.
The Bank of England cut rates in November for the second time in 2024, and is expected to ease monetary policy more slowly than its main rivals in 2025.
Australia’s dollar close to four-month lows
USD/AUD nears four-month lows after the Reserve Bank of Australia left interest rates unchanged at 4.35% at its December policy meeting, citing stable underlying inflation and labor market tightness.
USD/CNY rose to 7.2612 after disappointing trade data from China. While the country’s trade balance increased in November, both exports and imports were weaker than expected.
China is targeting more dynamic fiscal stimulus measures and moderately accommodative monetary policies in 2025, and the focus now turns to China’s Central Economic Work Conference, which is set to begin on Wednesday.
USD/JPY was up 0.3% to settle at 151.59, after earlier rising to 151.71 for the first time since November 28.Publication date:
2024-12-10 17:18:01 (GMT)
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