The US Dollar is trading in muted ranges as Traders digest this morning’s inflation report.
The Dollar was up heading into the data release but erased those gains in the minutes following to trade flat on the day. In a surprising print, headline CPI came in below expectations, with Year-over-Year coming in at 2.4% versus 2.5% expected, and core CPI came in at expectations. Traders have been anticipating two interest rate cuts this year, but the latest retail sales and inflation figures have many beginning to price in a 50% chance of a third cut as well. The first cut of the year is widely expected to come in June, with the second currently most likely to occur in September.
What to Watch This Week…
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GBP ⇑
The British Pound is up against the Buck this morning as Traders seek a short-term risk reduction ahead of domestic data next week. Employment and inflation will be front and center, but the labor market is arguably of more importance for determining the path forward. The Bank of England’s Chief Economist, Huw Pill, is of the opinion that interest rates are a bit too low but ruled out the possibility of hiking and is advocating for holding rates steady at 3.75% at the Monetary Policy Committee’s next meeting. Meanwhile, Traders are already convinced that the BoE will be cutting rates by 25-bps at the March 19th meeting.
