The U.S. consumer price data showed that the pace of inflation further moderated in October, increasing the likelihood that the Federal Reserve is hiking interest rates. This news caused the dollar to decline more than 1% against major currencies on Tuesday.
Following a 0.4% increase in September, the Labor Department’s Bureau of Labor Statistics (BLS) reported that U.S. consumer prices remained unchanged last month due to lower gas prices. According to the BLS, the consumer price index (CPI) increased 3.2% in the 12 months ending in October, following a 3.7% increase in September.
Treasury yields fell as soon as the report was released, and the dollar fell. With the benchmark 10-year falling below 4.5%, the dollar’s strength this year was severely undermined. According to John Doyle, head of trading and dealing at Monex USA in Washington, “We think that the dollar will continue to weaken a bit throughout the end of the year, maybe even early into January.”
The dollar index, which compares the value of the US dollar to six other currencies, fell 1.55% to 103.980, setting a record for the largest percentage decline in a single day since November 11, 2022. Additionally, the US dollar was about to see its biggest drop against the euro and British pound since November 2022. The dollar fell 1.73 percent versus the euro to $1.089, 1.82 percent versus the pound to $1.250, and 1.52 percent versus the Swiss franc to $0.888.
Additionally, the dollar dropped more than 1% versus the krone in Norway and more than 2% versus the dollars of Australia and New Zealand. In the market, where many analysts have been predicting the Fed’s interest rate hikes have peaked, the data was welcome news. Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin, said, “You can say goodbye to the rate-hiking era.”
However, Doyle and other experts cautioned that because of the tight labor market and a strong American economy that has kept consumer spending, the end of rate hikes did not necessarily mean that rate cuts would occur as soon as markets were anticipating. Regarding Fed policymakers, he remarked, “I don’t think that they’re going to be itching to cut rates necessarily. The Fed’s going to feel pretty comfortable to ride it out longer.”
In recent days, Fed Chair Jerome Powell and other officials have attempted to defy the notion that the aggressive rate-hike cycle of the US central bank was coming to an end. The CME’s FedWatch tool indicates that there is over a 68% chance in futures that the Fed will lower its overnight lending rate by 25 basis points or more by May of next year.
- Published By Team Genuine Reporter