Dollar steadies after cool inflation; sterling slips on weak growth data
2025.01.16 05:58
Investing.com – The US dollar steadied Thursday after the prior session’s losses in the wake of cooler inflation, while sterling slipped lower following the release of weak growth data.
At 04:45 ET (09:45 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded slightly higher to 108.950, snapping three days of losses.
Dollar remains elevated
The dollar fell Wednesday after the release of a benign report, which followed a tame reading on US producer prices on Tuesday.
“Global asset markets have enjoyed a positive 24 hours driven largely by the marginally sub-consensus US core CPI reading for December,” said analysts at ING, in a note.
”However, sticky headline and core inflation near 3% YoY still cast doubt on the Fed’s ability to cut this year and just 36bp of Fed easing is priced for 2025.”
The greenback also remains elevated ahead of Donald Trump’s inauguration next week as his plans to impose strict tariffs on allies and adversaries alike have also fueled the worries around price pressures.
There is data to digest later in the session, but today’s forex focus will likely be on the Senate confirmation hearing of Scott Bessent, Trump’s nominee for US Treasury Secretary.
“He will be questioned about the dollar, tariffs, and the upcoming fiscal agenda. We don’t think he’ll disrupt the strong dollar stance just yet,” added ING.
Sterling falls on weak GDP data
In Europe, traded 0.3% lower to 1.2199, after data released earlier Wednesday showed that the British economy barely returned to growth in November.
Gross domestic product rose by 0.1% from October, according to official data, marking the first month-on-month increase since August after falls in September and October. However, this was still below the 0.2% rise forecast.
The Bank of England is now widely expected to cut interest rates in February, with two rate cuts in 2025 almost fully priced into the market.
fell slightly to 1.0290, with German and Italian inflation data confirming prices remained subdued in December.
“Yesterday provided a great opportunity for EUR/USD to rally. Two-year rate spreads narrowed 5bp on the 0.2% reading on core US CPI. Yet EUR/USD struggled to hold the rally to 1.0350. Not very impressive and perhaps represents a conviction view that the eurozone and the euro will underperform this year on weak growth and weak leadership in the region,” said ING.
The European Central Bank widely expected to ease interest rates by around 100 basis points in 2025, much more than the Federal Reserve, suggesting more weakness ahead for the single currency.
Yen gains further
In Asia, dropped 0.4% to 155.75, falling to the lowest level since mid-December.
The yen surged this week as BOJ Governor Kazuo Ueda signaled that the central bank will consider raising interest rates when it meets next week, amid steady growth in inflation and wages.
traded largely unchanged at 7.3317, hovering around a 16-month high, with the focus turning to key fourth-quarter gross domestic product data due on Friday.
