During today's Asian trading, the US dollar rose slightly against major currencies, while market participants took a wait-and-see attitude ahead of the publication of US inflation data, which may affect the trajectory of the Fed's monetary policy.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) rose by 0.08% to 106.11. Yesterday, the index added 0.45%, and reached its highest level since May 1. As for the data, the consumer price index for October will be presented at 13:30 GMT. Experts warn that with investors already viewing Trump policies as inflationary, the market could be more sensitive if CPI comes in hotter-than-expected. Overall, the CPI report for October is likely to confirm the view that the last leg of the inflation path to the target level will be the most difficult. The consumer price index is expected to have increased by 0.2% month-on-month in October, bringing the annual rate up to 2.6% from 2.4% in September. Excluding food and energy, a third consecutive monthly 0.3% increase is expected to keep the core CPI at 3.3% year-on-year - still about one percentage point higher than before the pandemic. However, in the short and medium term, a number of upward risks remain, including a reduction in the supply of labor, the impact of deglobalization on import prices, a potential escalation of conflict in the Middle East and still high demand. Many of the policy measures proposed by Donald Trump during the election campaign are likely to increase this pressure and extend the path to the Fed's target, if they do not lead to a re-acceleration of price growth over the next year or so. In addition to CPI data, Fed Chair Jerome Powell is scheduled to speak this week, ahead of U.S. producer price index data on Thursday and retail sales on Friday. According to the CME FedWatch Tool, markets see a 62.1% probability of a 0.25% rate cut in December (compared to 69.9% a week earlier).
The yen fell 0.25% against the US dollar after dropping 0.58% yesterday. As a result, the yen reached its lowest value since July 30. Japanese data had a certain impact on the yen, which showed that in October wholesale inflation rose at the fastest annual pace in more than a year, as the resumption of the yen's decline led to an increase in import costs for some goods. On a yearly basis, producer prices climbed 3.4% - beating forecasts for 2.9% and up from 3.1% in September. Export prices were flat on month and up 0.6% on year, while import prices fell 0.2% on month and 2.1% on year. Producer prices were up 0.2% m/m in October after increasing 0.3% m/m in September. That exceeded expectations for a flat reading. Experts said that these data are likely to complicate the decision of the Bank of Japan on how soon to raise interest rates.