A Decline in U.S. Consumer Inflation Expectations Keeps Dollar Rally in Check
U.S. Consumer Inflation Expectations
Amidst a decline in U.S. consumer inflation expectations, the dollar rally was kept in check on Tuesday. Traders reaffirmed their bets for a slew of Federal Reserve rate cuts this year.
Cryptocurrencies and Bitcoin
In cryptocurrencies, bitcoin held near its strongest level since April 2022, on growing anticipation that the Securities and Exchange Commission will imminently approve spot bitcoin exchange-traded funds (ETF).
New York Fed’s Survey of Consumer Expectations
The New York Fed’s latest Survey of Consumer Expectations revealed that U.S. consumers’ projection of inflation over the short run fell to the lowest level in nearly three years in December.
U.S. Inflation
A reading on U.S. inflation is due later in the week, which will likely provide further clarity on how much room the Fed has to ease rates this year.
Fed Rate Cuts
Futures point to around 135 basis points worth of easing priced in for the Fed this year, with approximately a 60% chance that they start cutting in March.
Market Expectations
“The market is still trying to find its feet in terms of the trajectory and timing of the first U.S. rate cut,” said Kamal Sharma, senior G10 FX strategist at Bank of America, who expects the Fed to start cutting rates at the March meeting.
Impact on Currency
The U.S. dollar, which measures the currency against a basket of six currencies, was little changed at 102.32, having risen 1% last week. The euro last stood at $1.0947, away from its recent three-week low of $1.0877, while sterling slipped 0.1% to $1.2737.
Asia and Japan’s Inflation
In Asia, data on Tuesday showed core inflation in Japan’s capital slowed for the second straight month in December, taking some pressure off the Bank of Japan to rush into exiting ultra-loose monetary policy.
Cryptocurrency Market
Elsewhere, bitcoin stood at $46,713, after having scaled a 21-month top of $47,281 in the previous session. Ether, the second-largest cryptocurrency, fell 1.4% to $2,299.
Spot Bitcoin ETFs
A raft of investment managers had on Monday disclosed the fees they plan to charge for their proposed spot bitcoin ETFs, in another step toward approval this week by the U.S. securities regulator.
Investor Expectations
“Investor expectations are justifiably high,” said eToro global markets strategist Ben Laidler, citing increased engagement from the SEC.
