Dollar holds firm ahead of U.S. inflation, bitcoin targets fresh highs.
The dollar is reaping the benefits of Republican Donald Trump’s victory in the U.S. presidential election last week, with investors pricing in policies of lower taxes and trade tariffs under the incoming administration that are seen as inflationary.
The Trump trade has pushed up U.S. Treasury yields as markets wager the Federal Reserve may temper the extent of its future rate cuts.
The President-elect’s Republican Party looks set to control both chambers of Congress when Trump takes office in January, Decision Desk HQ projected on Monday, enabling him to push an agenda of slashing taxes and shrinking the federal government.
The U.S. dollar index which measures the currency against a basket of currencies, tacked on 0.02% to 106.01, not far from Tuesday’s high of 106.17, its strongest since May 1.
Bitcoin paused its record-breaking climb, down 0.23% at $87,105.05 after hitting an all-time high of $89,998 on Tuesday. Trump has vowed to make the U.S. “the crypto capital of the planet”.
On Wednesday, investors will get a fresh read on U.S. inflation when the October Consumer Price Index (CPI) report is released later in the day. The core gauge is expected to rise 0.3%, though anything above that could further reduce the chance of a December easing.
“Focus is likely to shift back to inflation and Fed policy in the latter part of the week, but whether that brings an unwinding of Trump trades remains to be seen,” said Charu Chanana, chief investment strategist at Saxo.
Traders are also grappling with fresh uncertainty for the Fed following Trump’s win, potentially leaving the central bank less scope to cut interest rates if prices go up again under the incoming administration.
Markets currently have about a 60% chance of another quarter basis point cut priced in for December, down from around 84% a month ago (Cay)
Source: CMBC
