CPI Softens, Dollar Loses Steam
The US dollar briefly strengthened on Tuesday following the release of inflation data, but the gains were quickly pared as US core inflation came in lower than expected. This data reinforces the view that the Federal Reserve still has room to begin easing policy later in the year. The Bloomberg Dollar Spot Index remained slightly higher following the CPI report, despite previously rising by around 0.1%.
The US Bureau of Labor Statistics reported that core CPI rose 0.2% (MoM) in December, below market estimates of 0.3%. On an annual basis, core CPI stood at 2.6% (YoY)—matching a four-year low. This “cooler” reading caused the dollar to lose steam as markets reconsidered the scenario of a rate cut in the next period.
In major currency markets, the Japanese yen was the biggest laggard following political news from Tokyo. USD/JPY rose 0.5% to 158.90, its highest level since July 2024, after media reports suggested Prime Minister Sanae Takaichi was considering a snap election. These political risks put pressure on the yen as investors chose to avoid uncertainty.
Meanwhile, other currencies also tended to weaken against the dollar: EUR/USD fell 0.6% to 1.1660, and GBP/USD edged lower to 1.3459 (with a bullish technical pattern that still leaves room for a test of new highs). In Canada, USD/CAD held near 1.3880 after data showed building permits fell 13.1% (MoM) in November—adding further reason for the market's assessment that Canadian growth is slowing.
Source: Newsmaker.id
