Dollar Sinks After Data Shows US Inflation Cooling


The dollar fell more than 1% against major currencies on Tuesday after U.S. consumer price data showed the pace of inflation moderating further in October, increasing the odds that the Federal Reserve is done hiking interest rates. U.S. consumer prices were unchanged last month amid lower gasoline prices, the Labor Department’s Bureau of Labor Statistics (BLS) said, following a 0.4% rise in September.

In the 12 months through October, the consumer price index (CPI) climbed 3.2% after rising 3.7% in September, BLS said. The dollar immediately tumbled on the report’s release and Treasury yields plunged. The benchmark 10-year fell below 4.5%, removing a major support to the dollar’s strength this year. “We think that the dollar will continue to weaken a bit throughout the end of the year, maybe even early into January,” said John Doyle, head of trading and dealing at Monex USA in Washington. The dollar index, a measure of the U.S. currency against six peers, slid 1.55% to 103.980, on track to its biggest single-day percentage decline since Nov. 11, 2022.

The U.S. currency also was poised for its largest declines since November 2022 against the euro and British pound. The dollar slipped 1.73% against the euro to $1.089, 1.82% against the British pound to $1.250 and 1.52% against the Swiss franc to 0.888. The dollar also fell more than 1% versus the Norwegian krone and more than 2% against the Australian and New Zealand dollars. The data was welcome news in the market, where many analysts have been predicting the Fed’s interest rate hiking has peaked. “You can say goodbye to the rate-hiking era,” said Brian Jacobsen, Chief Economist at Annex Wealth Management in Elm Grove, Wisconsin.

But Doyle, among others, cautioned the end of rate hikes did not mean rate cuts would be coming as soon as markets were predicting due to a tight American labor market and resilient U.S. economy that has kept consumers spending. “I don’t think that they’re going to be itching to cut rates necessarily,” he said, referring to Fed policymakers. “The Fed’s going to feel pretty comfortable to ride it out longer.” Fed Chair Jerome Powell and other policymakers in recent days have tried to push back against expectations that the U.S. central bank was done with its aggressive rate-hike cycle. Futures show more than a 68% probability that the Fed cuts its overnight lending rate by 25 basis points or more by next May, according to the CME’s FedWatch tool.

YEN STILL ON INTERVENTION WATCH The Japanese yen, meanwhile, also gained against the dollar, but less than its peers. The yen strengthened 0.97% to 150.23 per dollar when earlier coming under pressure after it briefly jumped against the dollar on Monday – having touched a one-year low. The move was attributed to a flurry of trading in options rather than any intervention from Japanese authorities. DTCC data from LSEG’s Eikon platform shows yen options worth a notional $3.5 billion with strike prices between 151.90 and 152 are due to expire between Wednesday and Friday.

Another $2.2 billion notional worth of options with strikes between 151.90 and 152 will expire between Nov. 20 and the end of the month. Japanese authorities in September and October last year intervened in the currency market to boost the yen for the first time since 1998. “Our base case is that we could have intervention if we break the 152 level for dollar/yen,” said Yusuke Miyairi, an FX strategist at Nomura. OPTIONS STRIKE PRICES BETWEEN 151.90 AND 152 YEN Date of expiry Nov 15 Nov 16 Nov 17 Notional value of 2.6 548.7 351.1 options expiring billion million million (USD).


Read the full article.

This website may contain copyrighted material the use of which has not been specifically authorized by the copyright owner. This site operates under the assumption that this not-for-profit use on the Web constitutes a “fair use” of the copyrighted material as provided for in Title 17, Chapter 1, Section 107 of the U.S. Copyright Law. If you wish to use this copyrighted material for purposes of your own that go beyond such “fair use,” you must first obtain permission from the original copyright owner.

As a subject matter expert, Brian Jacobsen, Chief Economist at Annex Wealth Management is often interviewed with individuals not affiliated with the firm. Annex Wealth Management does not have control over the content or opinions expressed by these unaffiliated parties.

Annex Wealth Management, LLC is an investment advisor registered with the SEC doing business as Annex Wealth Management® (“Annex”). The information provided should not be relied upon by the viewer as legal or tax advice, or research or investment advice regarding any investment, nor should it be construed as a solicitation or recommendation to purchase or sell any stock, bond, or other security. This site contains excerpts from Annex’s live, unscripted and extemporaneous broadcasts. Considerable efforts are made to provide a balanced presentation and a sound basis for evaluating the content, however, live broadcasts don’t always lend themselves to a full and fair discussion of all the material facts and investor may want to consider before investing. All items on this site have been previewed by a qualified supervisor at Annex to avoid unqualified, promissory, exaggerated, unwarranted, or misleading statements or claims, including promises of specific future returns or projections of investment performance.