The Dollar Eases as Market Shrugs Off Inflation Revision Data
Dollar Eases on Fourth Week of Gains
The dollar eased on Friday as it headed for a fourth week of gains while traders reduced their bets on how quickly the Bank of Japan might raise interest rates and how soon the Federal Reserve will cut them.
Market Outlook on Fed Rate Cuts
Traders shrugged off revised U.S. monthly consumer prices that rose less than initially estimated in December. While underlying inflation remained a bit warm, the mixed picture did not alter the market’s outlook on the timing of Fed rate cuts.
Revised Consumer Price Index (CPI)
The annual revisions published by the Labor Department also showed the consumer price index (CPI) increasing slightly more than previously reported in October and November.
Fed’s Perspective on Rate Cuts
“The revisions aren’t going to make the Fed cut rates,” said Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA LLC in New York. “The market’s in a rush, (but) the Fed is sitting there saying we’re not in a rush. Actually, things are really pretty good from their perspective,” he said.
Currency Market Movement
The dollar fell 0.07% to 104.04, while the euro was up 0.08% to $1.0785. The yen was little changed at 149.32 per dollar after trading at 149.575 earlier, its weakest since Nov. 27. It is heading for about a 0.64% slide this week, having fallen in value in five out of the last six weeks.
Market Expectations and Speculations
Fed officials this week again signaled the U.S. central bank has no pressing need to cut rates. The message gave the dollar an extra tailwind that pushed the yen to a 10-week low as traders reduced bets on how quickly the Bank of Japan (BOJ) might raise rates. BOJ Governor Kazuo Ueda said on Friday there was a high chance for easy monetary conditions to persist even after the central bank ends its negative interest rate policy, which the market expects to happen as early as next month.
CPI and Future Rate Cut Predictions
The next major scheduled U.S. data release is CPI for January on Tuesday. Traders have all but ruled out a cut at the Fed’s next policy meeting in March, versus a chance of 65.9% a month ago, according to CME Group’s (NASDAQ:) FedWatch Tool. It shows around a 60% chance of a cut by the Fed at its May meeting.
Global Currency Movement
Sterling rose 0.15% to $1.2635. Both the euro and the pound have been relatively resilient this week, with officials from the European Central Bank and Bank of England pushing back against market wagers on early rate reductions. The Swiss franc weakened to 0.8747, with the dollar up about 0.93% on the safe haven currency this week as traders digested data suggesting the Swiss National Bank could be intervening in markets to weaken the franc.
Bitcoin and Cryptocurrency Market Movement
Bitcoin rose 4.9% to $47,549.00, after earlier hitting a high of $48,183.
