THE US dollar was flat against major currencies on Friday (Oct 11) as markets digested a slew of economic data that supported the Federal Reserve’s current monetary policy path.
A gauge of US producer prices was unchanged in September, the Labor Department reported, the latest economic data to indicate the Fed will likely cut rates again next month.
Consumer prices in September rose 0.3 per cent, according to data released on Thursday, slightly hotter than expected, while weekly jobless claims surged, pointing to labour-market weakness. The weekly jobless claims data was skewed by Hurricane Helene.
Next week’s data will be affected by Hurricane Milton, the second hurricane in two weeks to hit the southeast US.
The euro was flat at US$1.1093, the pound was up 0.08 per cent at US$1.3072, while the dollar was up 0.35 per cent against the Japanese yen at 149.12.
The dollar index was flat at 102.91, taking a breather after a recent steady climb that took it above 103 on Thursday, its highest since mid-August on the back of traders reducing bets on further jumbo interest-rate cuts by the Federal Reserve at its remaining meetings this year.
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Markets are betting a nearly 91 per cent chance of a 25-basis-point cut at the Fed’s next meeting and 9 per cent probability of no cut, according to the CME’s Fedwatch tool.
“That slightly higher inflation print has really backed the market away from being overly aggressive on how deep they were looking for the interest-rate cuts to go by the end of the year,” said Amarjit Sahota, executive director at Klarity FX in San Francisco.
“So there was already an overprice in there and that’s basically unwound this week.”
Britain’s economy grew in August after two consecutive months of stagnation, providing some relief to finance minister Rachel Reeves ahead of the new Labour government’s first budget later this month.
However, in addition to being broadly steady on the dollar the pound was little changed on the euro at 83.67 pence to the common currency.
Traders are also watching French politics, after the government on Thursday delivered its 2025 budget with plans for 60 billion euros (S$85.7 billion) worth of spending cuts and tax hikes on the wealthy and big companies to tackle a soaring fiscal deficit.
The budget is unlikely to pass until December, as French Prime Minister Michel Barnier and his allies in President Emmanuel Macron’s camp lack a majority by a sizeable margin and will have little choice but to accept numerous concessions.
Markets are also awaiting a news conference from China’s finance ministry on fiscal policy on Saturday. The Chinese yuan strengthened 0.2 per cent against the greenback to 7.067 per dollar.
The Australian dollar strengthened 0.2 per cent versus the greenback to US$0.6753, while the New Zealand dollar was at US$0.611 after the central bank on Wednesday slashed rates by a half point and hinted at further cuts to come.
In cryptocurrencies, bitcoin gained 5.4 per cent to US$62,930.00. Ethereum rose 3.8 per cent to US$2,456.70.
“The market is satisfied because there’s nothing there that really tells against the narrative that the Fed is cutting; the only debate is how fast they’re going to cut,” said Steven Englander, head of Global G10 FX Research at Standard Chartered in New York.
“Overall, the data have been slightly encouraging to that narrative and none of the data have been discouraging to the narrative that the Fed is cutting rates.” REUTERS
