The dollar rebounded slightly on Wednesday after experiencing its largest drop in a year the previous day. The drop was triggered by data revealing that U.S. consumer prices remained unchanged in October, with the annual increase in underlying inflation being the smallest in two years. The Consumer Price Index (CPI) rose by 3.2 percent in the 12 months through October, falling short of economists’ expectations after a 3.7 percent increase in September.
Investors have reacted to this data by significantly reducing the likelihood of another interest rate hike by the Federal Reserve in December. In fact, there are now increasing bets on a rate cut in May of next year, according to the CME Group’s FedWatch Tool.
In the UK, inflation has eased to its slowest pace in two years in October, prompting a reevaluation of the Bank of England’s policy outlook and impacting the value of the pound. October’s inflation rate was recorded at 4.6 percent, lower than the forecasted 4.8 percent and September’s 6.7 percent.
Michael Hewson, the chief market strategist at CMC Markets, expressed concern about the current situation, stating, “For me what this does concern, is we’re done, when it comes to rate hikes and it’s a question of when do rate cuts come and that’s what markets are staring to price, particularly if you look at the bond market.”
The dollar index, which measures the dollar’s performance against six other major currencies, rose by 0.16 percent to 104.26, not far from Tuesday’s two-month low of 103.98.
The pound, on the other hand, has retreated from its two-month highs after the release of data showing a slowdown in British inflation. Sterling is now valued at $1.2463, representing a 0.3 percent decrease. However, it is worth noting that the pound experienced a significant one-day gain of 1.8 percent against the dollar on Tuesday.
The euro also experienced a 0.3 percent decline against the dollar, reaching $1.0848. This came after the euro reached its highest level since August the previous day.
The dollar/yen pair remained unchanged at 150.42 following news that Japan’s economy contracted in July-September, complicating the central bank’s efforts to transition away from its ultra-easy monetary policy. The yen had hit a one-year low near 152 on Monday but has since seen some stability. Moh Siong Sim, a currency strategist at the Bank of Singapore, believes that the softer U.S. yields and the risk of intervention by the Japanese government could limit further weakening of the yen.
As for the offshore Chinese yuan, it briefly rose to a three-month high of $7.2385 against the dollar after domestic industrial output and retail sales growth surpassed expectations. However, concerns about ongoing weakness in China’s property sector, including falling sales and slumping real estate investment, dampened the rally. The offshore yuan ended the day flat at 7.2484 per dollar.
In summary, the dollar has recovered slightly after a significant drop caused by weaker U.S. inflation data. The pound also experienced a decline due to lower-than-expected UK inflation figures. These developments have led investors to reassess the outlook for both the Federal Reserve and the Bank of England’s monetary policies. The euro, yen, and offshore Chinese yuan have all experienced varying trends in response to different economic indicators and factors.
More detail via www.theepochtimes.com here… ( Image via www.theepochtimes.com )