The U.S. Dollar halted a two-day rally overnight, losing against most of its G10 rivals.
Overview
Equity futures were higher before this morning’s highly anticipated inflation report, reducing demand for the greenback. The trend has accelerated in early trading, and the dollar fell to a one-week low. The greenback weakened nearly a percent against all of its counterparts after consumer prices softened. Year over year, CPI rose 7.1%, lower than the 7.3% forecast by economists. On a month-over-month basis, prices increased 0.1% in November, also lower than the 0.3% estimated. Softening inflation will put less pressure on the Federal Reserve to continue aggressive policy tightening. In fact, today’s print likely solidifies a 50-basis point hike at the conclusion of their meeting tomorrow. We will keep an eye on what today’s data does for future interest rate bets. So far, the market reaction is clear. American stock futures are soaring, with the tech-heavy Nasdaq rising over 4.0% at the time of writing.There is no further tier 1 data slated for the rest of the day, so expect traders to continue to focus on today’s inflation print and the effect on future monetary policy.
What to Watch Today…
- No major economic events are scheduled for today
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CAD ⇑
The Canadian dollar rose against the U.S. as the greenback stumbled across the board. The price of oil ticked up 1.0%, adding another reason to buy the loonie and sell the U.S. dollar. However, it’s worth noting that the Canadian dollar’s rally is weaker than most of the other U.S. dollar’s rivals. The CAD has gained 0.6%, but the Euro and Sterling have gained over a percent, and the Japanese yen and Australian dollar have jumped 2.0%.
GBP ⇑
The British pound also took advantage of wide-spread U.S. dollar weakness. Indeed, the sterling rose over a percent and touched its strongest level since mid-June. The sterling’s recovery versus the U.S. dollar has been quite impressive. The sterling is up 16.0% against the U.S. dollar since reaching historic lows at the end of September. The Bank of England is expected to raise interest rates by 50 basis points on Thursday.
