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USD reaches three-month high against major peers

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The dollar reached a new three-month high against major rivals on Wednesday as traders scaled back bets for a rate cut by the Fed following Tuesday’s hot US inflation data.


The US consumer price index (CPI) rose 3.1% in January from the year before, compared to a forecast 2.9% increase. Since then, money markets have priced in no cut by the US central bank next month and a 53% chance of a reduction in June, says ME Group.


The Dollar index, measuring the currency against six major rivals, was up 0.05% at 104.91 after reaching a new three-month top of 104.97.


“Hot US January CPI has closed the door for a March Fed rate cut. While PCE data will be more important, the debate has shifted to May or June for the start of the Fed’s easing cycle unless banking risks escalate,” stated Saxo’s Head of FX Strategy, Charu Chanana.


“This has made Dollar strength more durable as risks of SNB (Swiss National Bank) and ECB (European Central Bank) rate cuts ahead of the Fed could gain traction.”


Furthermore, the dollar edged up 0.35% against Sterling to $1.2548, momentarily reaching an eight-day high as data revealed UK inflation did not accelerate last month as forecasted.


Indeed, inflation in Britain stood at an annual 4.0% in January, the same as in December. Meanwhile, economists surveyed by Reuters estimated a rise of 4.2%.


“Base effects should now set up a very sharp fall in the annual inflation rate in the next four months,” according to Michael Metcalfe, Head of Macro Strategy at State Street Global Markets.


“This may yet be enough based on January’s benign reading to get the inflation rate near enough to target to allow the BoE to begin its easing cycle in June.”


Additionally, there was little move for the Euro after a series of eurozone economic data. The single currency fell 0.06% at $1.0702, after briefly falling to a new three-month low of $1.0695.


Employment in the eurozone increased by 0.3% quarter-on-quarter and by 1.3% year-on-year in Q4. Employment was forecast to rise 0.2% quarter-on-quarter and 1.1% year-on-year, according to the results of a Reuters poll.

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Mauritius,
J. Balcikonio str. 9,
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Lithuania,

media contact

About

deVere Group – Foreign Exchange’s Public Relations Department deals with all areas of the media and external communications including international, national, regional, local, trade, consumer, print, broadcast, social and online. The Department aims to provide a helpful service to journalists, broadcasters and editors, amongst others, and reply to all media enquiries, including urgent enquiries out of hours, within agreed deadlines.

Contact

Our press office does not have access to client details and will not be able to assist with individual client enquiries. Please contact deVere Group – Foreign Exchange’s Head of Public Relations on [email protected] or call +44 2071220925.