Dollar drifts lower ahead of key inflation release
2024.11.27 08:52
Investing.com – The US dollar retreated Wednesday, consolidating against its major peers ahead of the release of a key US inflation figure later in the session.
At 04:45 ET (09:45 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.4% lower to 106.500, falling back further from last week’s two-year peak.
Dollar consolidates ahead of PCE data
Foreign exchange traders appear to be cashing in dollar gains ahead of the release of the October price index, due later in the session, before US markets close for the Thanksgiving holiday on Thursday.
The safe-haven US currency had received support from President-elect Donald Trump’s threat to impose tariffs on Canada, Mexico and China, reigniting fears of a global trade war, with dire implications for global economic growth.
The measures are also widely seen as potentially inflationary for the US economy, which could prevent the Federal Reserve from cutting interest rates substantially.
“The highlight of today’s session will be the release of the US October core PCE deflator, expected at 0.3% MoM,” said analysts at ING, in a note.
“Even though the market has largely moved on from the US inflation story, a sticky reading will add to doubts that the Fed needs to cut in December after all. Expect the dollar to largely hold recent gains, although month-end selling remains a risk.”
Euro pressured by weak economic outlook
In Europe, gained 0.3% to 1.0514, helped by the session’s dollar weakness, but the single currency remains under pressure given the weak European economic outlook.
Data released earlier Wednesday showed that France’s index fell in November, hit by households’ rising fears about unemployment.
The monthly business survey published by INSEE showed that the sentiment indicator fell to 90 from a revised reading of 93 in October.
The European Central Bank has cut rates three times already this year, and is widely expected to cut once more in December.
traded 0.3% higher to 1.2607, pushing further away from last week’s six-week low.
“With one-week deposit rates at 4.75% and the highest in the G10 space, sterling may be deriving some inflows as the market makes up its mind about the speed and magnitude of Trump’s policy agenda,” said ING.
“Additionally, the Bank of England rate profile continues to get traded closer to the Fed than the ECB and suggests sterling should outperform against the euro.”
Yen gains on safe-haven bets
fell 1% to 151.58, with the Japanese yen helped by safe-haven bids, as well as growing bets for a December rate hike in Japan.
slipped slightly to 7.2505, but still remained near a four-month high amid concerns that Trump’s potential tariffs will hit the already-weakened Chinese economy.
rose 0.9% to 0.5889, rebounded from multi-month lows after the country’s central bank cut interest rates by 50 basis points and signaled further easing early next year, citing subdued domestic economic activity and waning inflationary pressures.
