U.S. dollar declined on Monday. What about the Euro?
The greenback tumbled down on Monday. However, it didn’t lose much as investors expected the Federal Reserve to continue hiking interest rates. Last week, new data showed that U.S. wholesale inflation jumped by more than analysts expected in November. That means the central bank will have to take additional measures to push it lower.
Traders widely expect the agency to deliver a 75-basis point rate increase after the series of same-size hikes, especially considering some struggles in the labor market. Despite soaring inflation, the U.S. economy remains quite resilient, though.
According to data released on Friday, U.S. producer prices surged by 7.4% year-on-year last month, compared with forecasts for an increase of 7.2%. Carol Kong, a currency strategist at the Commonwealth Bank of Australia (CBA), noted that market participants worried about inflation being persistently high, which would encourage the Federal Reserve to keep policy at a restrictive level for longer than previously forecasted.
However, consumer inflation data for November is due on Tuesday. It will likely influence the market sentiment. Economists expect the data to report a 6.1% jump in the core reading, excluding food and energy prices. That’s lower compared to 6.3% in October.
Deutsche Bank strategist Jim Reid noted that together, this report and the FOMC (consumer inflation data) could change the tone of the message, the dot plots, and the statement. Still, they are unlikely to change the headline 50bps raise.
Meanwhile, the dollar rallied against commodity-linked currencies today, including the Australian and New Zealand dollars. Moreover, it briefly skyrocketed as much as 0.5% versus the Sterling. Even though new data showed the British economy rebounded in October from a public holiday for Queen Elizabeth’s funeral, it still hinted at a bleak outlook.
How are the British Pound and Sterling faring now?
The pound exchanged hands higher by 0.2% at $1.2287 at last. It had plummeted to a session low of $1.2207 for a while but managed to recover later. Still, the currency shaved off 0.1% versus the Euro, trading at 86.03 pence.
On Monday, the common currency climbed up by 0.4% to $1.0567. The Euro has soared by almost 8% thus far in the fourth quarter. Traders have previously bet on the European Central Bank sticking to a course of aggressive rate hikes. However, new forecasts show that the ECB will most likely hike rates by half a percentage point this week.
