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Dollar steady as investors weigh US CPI


U.S. consumer prices rose in December as rents maintained their upward trend, rising 0.3% for the month and up an annual 3.4%

The dollar held steady against peer currencies on Friday, as investors weighed higher-than-expected U.S. CPI against market bets that the Federal Reserve will cut rates in March.

U.S. consumer prices rose in December as rents maintained their upward trend, rising 0.3% for the month and up an annual 3.4%.

Still, traders are pricing in a 73.2% probability for the first 25 bps cut to come in March, with several more cuts to follow, as per the CME Group’s FedWatch Tool.

Once again, we see a disparity between market pricing, data and the Federal Reserve’s narrative, said Senior Market Analyst at City Index Matt Simpson.

The U.S. dollar did not behave in such a way to indicate USD bears are running scared, he said.

The dollar index was hovering near 102.26, down from Thursday’s high of 102.76 but well ahead of the five-month low of 100.61 hit in December when traders began to aggressively price in a raft of Fed cuts for 2024.

Cleveland Fed President Loretta Mester said on Thursday that the latest consumer price inflation (CPI) figures mean that it would likely be too soon for the central bank to cut its policy rate in March.

At a separate event, Richmond Fed President Thomas Barkin said that the data did little to clarify the trajectory of inflation.

What is important for the Fed is that the last mile in bringing inflation back to target appears to be more difficult, wrote Commerzbank analysts in a note.

We therefore feel confirmed in our assessment that the Federal Reserve will not cut interest rates in March, as the market expects, they said.

The euro stuck near $1.0977 after gaining on the dollar the previous day, while sterling was last trading at $1.277, up 0.07% on the day.

The Japanese yen was little changed at 145.27 per dollar but remained off Thursday’s low of 146.41, its lowest since December 11.

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