The U.S. dollar held near a 6-1/2-month high against its major peers and bitcoin was solidly positioned just below its record highs on Wednesday as markets priced so-called “Trump” trades ahead of the key US inflation data later today.
The dollar is reaping benefits from Republican Donald Trump's victory in the U.S. presidential election last week, with investors weighing tax and tariff reduction policies under the incoming administration as inflationary. [US/].
The Trump trade sent U.S. Treasury yields higher as markets bet the Federal Reserve could moderate the size of its future rate cuts [US/].
The president-elect's Republican Party is expected to control both houses of Congress when Mr. Trump takes office in January, Decision Desk HQ forecast Monday, allowing him to implement a program of lower taxes and lower taxes. federal government.
The U.S. dollar index, which measures the currency against a basket of currencies, gained 0.02% to 106.01, not far from Tuesday's peak of 106.17, the highest since May 1.
Bitcoin halted its record climb, falling 0.23% to $87,105.05, after hitting an all-time high of $89,998 on Tuesday. Mr. Trump has pledged to make the United States “the crypto capital of the planet.”
On Wednesday, investors will get a new reading on US inflation when the October Consumer Price Index (CPI) is released later in the day. The core index is expected to rise by 0.3%, but any overshoot could further reduce the chances of easing in December.
“Focus is expected to return to inflation and Fed policy later this week, but it remains to be seen whether this will lead to an unwinding of Trump trades,” said Charu Chanana, chief strategist at Saxo.
Traders also face new uncertainty for the Fed following Trump's victory, which could leave the central bank with less room to cut interest rates if prices start to rise again under the administration. incoming.
According to CME Group's FedWatch tool, markets currently have about a 60% chance of seeing another quarter-basis point decline in December, up from about 84% a month ago.
Markets received more information from Fed officials, with comments from Minneapolis Fed President Neel Kashkari and Richmond Fed President Thomas Barkin on Tuesday, although both indicated that they were not ready to judge the speed or extent of the reduction in interest rates.
Chairman Jerome Powell is scheduled to speak on Thursday, ahead of producer price index (PPI) data on the same day and retail sales on Friday.
The euro remained under pressure from political uncertainty as Germany, the bloc's largest economy, is due to hold elections on February 23, weeks after the collapse of Chancellor Olaf Scholz's coalition government. . Meanwhile, markets are pricing in tariffs that Trump could impose on Europe and China.
The euro remained near its lowest level in a year, at $1.0596, reached on Tuesday, and lost 0.05% to $1.061875.
Sterling held steady at $1.2746, under pressure from a generally firmer greenback.
Wholesale inflation in Japan accelerated in October as the falling yen pushed up import costs for some goods, data showed Wednesday, complicating the Bank of Japan's decision on whether to date of interest rate increase.
The dollar rose 0.17% against the yen to 154.88 after hitting 154.934, its highest level against the Japanese currency since July 30.
Elsewhere, the Aussie, which tends to be sensitive to China's economic outlook, remained under pressure, falling 0.02% to $0.6531.
Australian wages rose at the slowest annual rate since the end of 2022 in the third quarter amid an influx of new workers and falling inflation, strengthening the case for a reduction in interest rates.
