During today's Asian trading, the US dollar rose moderately against major currencies, continuing yesterday's increase and reaching a one-week high, while investors are preparing for the publication of key US data that could provide clues on the pace of Fed's interest rate cuts.
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 0.23% to 106.64. Since the beginning of the week, the index has added 0.5%. The November Consumer price index (CPI) report, which will be released at 13:30 GMT, is considered the last important data before the Fed meeting next week. Economists predict that the overall CPI increased by 2.7% per annum after an increase of 2.6% per annum in October. The core CPI, which excludes food and energy prices, is projected to show growth of 3.3% per annum, which is in line with the pace of the previous two months. According to market participants, only a very poor CPI report, indicating a sharp resumption of inflationary pressures, could undermine the chances of a third consecutive reduction in interest rates by the Fed at its last meeting in 2024, which will be held on December 17-18. If the report is in line with expectations, this should not affect the markets' expectations regarding the Fed's interest rates. According to the CME FedWatch Tool, markets see a 86.1% probability of a 0.25% rate cut in December (compared to 78.1% a week ago), while the probability of an additional rate cut in January is 20.2%.
The yen rose 0.25% against the US dollar, retreating from a 2-week low, helped by Japanese data that indicated an acceleration of wholesale inflation and strengthened the arguments in favor of tightening monetary policy by the Bank of Japan at the December meeting. The official report showed that producer prices increased by 3.7% per annum in November. That exceeded expectations for an increase of 3.4% and was up from the upwardly revised 3.6% gain in October (originally 3.4%). On a monthly basis, producer prices were up 0.3% - unchanged from the October reading following an upward revision from 0.2% and exceeding expectations for 0.2%.