The U.S. Dollar is trading in stronger ranges following the release of the much-awaited inflation numbers for December.
Overview
Consumer Price Index figures last month showed a slight increase from what was expected, with 0.3% instead of 0.2%, thus bringing the annual average from 3.2% to 3.4%.
Initial jobless Claims came in slightly lower than predicted, while Real Avg. Hourly earnings kept pace with the month prior. Overall, this means disinflation in the U.S. has backtracked, but thus far, the reaction has not been that wild as chances of a Federal Reserve rate cut stand at around 65.0%, similar to the last few weeks.
If the chances for cuts significantly decrease, then the Buck could rally more seriously. It will put pressure on other economies to demonstrate that they, too, can hold the line, but if they see the need for stimulus before the Fed ever acts, their respective currencies will plummet. Producer Price Index figures will be out tomorrow. Inflation gauges from China are also due then, and could have some impact.
What to Watch Today…
EUR ⇓
The Euro fell a bit, but it is staying afloat despite higher inflation in the U.S. after financial authorities maintained a tightening bias for the Eurozone. European Central Bank Executive Board member Isabe Schnabel presented rather hawkish arguments during an interview, ascertaining that there is no need to start considering reversing course. Her statements and rosier outlooks for what is to come for the continent in a year of recovery have lowered the chances of an ECB interest rate cut by March to 31.0%. To get a deeper perspective, read our 2024 MonexUSA Currency Outlook.
GBP ⇓
Sterling is also flowing at tight levels as the year gets going with predictions for the short-term as well as the blurry long-term. Yesterday, Bank of England Governor Andrew Bailey spoke to the U.K. Treasury Select Committee without revealing any insights that deviated from his cautious stance on keeping interest rates untouched until inflation is dented further.
With predictions of better times for the U.K. and some vulnerability with political friction if there are calls for an early election, the main indicator will be economic growth, which will be out in the form of Monthly Gross Domestic Product for November as well as a 3-month measure up to that point. The Month-on-Month figure is supposed to reveal a 0.2% expansion while the three-month may not escape a (-0.1%). Anything more positive will certainly bode well for Pound’s value.
