The dollar continued to rise on Wednesday after the publication of a US inflation index which showed a further acceleration in consumer prices in November in the United States, as expected by analysts. Around 7:00 p.m. GMT, the greenback appreciated by 0.41% against the single European currency, to 1.0484 dollars per euro. The Dollar Index, which compares the greenback to a basket of six currencies, gained 0.36%. Consumer prices increased 2.7% year-on-year in November in the United States, compared to 2.6% in October, according to the CPI index released Wednesday by the US Department of Labor.
These developments are in line with analysts’ expectations, according to the Market Watch consensus. The numbers have fallen “right on target”observed Tastylive analyst Christopher Vecchio. “The CPI index came out as expected (…) and in the mind of the market, these figures do not prevent a reduction (of rates) by the Fed”the American central bank, during its next meeting on December 17 and 18, underlined Brad Bechtel, analyst at Jefferies.
Further Fed rate cut expected
Nearly 95% of market participants expect another rate cut at the next Fed meeting, according to the CME Group assessment. “The dollar was already strong before (the publication of) the CPI index, so it is generally a continuation”and noté M. Bechtel. “The general feeling in the market is that the tariffs mentioned by Donald Trump and his tax policies will lead to less easing from the Fed next year, and a stronger American economy”he said.
“When we consider monetary policy divergences, it is likely that the Fed will maintain higher interest rates than its counterparts at the Bank of England or the European Central Bank” (BCE), supported M. Vecchio. “This should, at least for now, prevent significant dollar weakness”he added. Investors and analysts expect the ECB, which meets on Thursday, to lower its main key rate by 0.25 percentage points, in a context of sluggish growth in the euro zone. Affected by the prospect of an increase in the interest rate gap between the ECB and the Bank of England (BoE), the euro hit its lowest level since March 2022 against the pound on Wednesday, at 82 .31 pence for one euro.
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