Dollar Rebounds From Inflation Data Drop, Euro Dips
The dollar rebounded while the euro dipped on Monday, as market moves were being dictated by recent global central bank meetings that set expectations for diverging rate cut paths next year.
The dollar index , which measures the U.S. currency against six of its largest peers, resumed its upward trajectory. It suffered on Friday its biggest one-day drop in nearly a month following a softer-than-expected reading on inflation that was still above the Federal Reserve's 2% target rate.
The greenback is on track for its fourth gain in five sessions, during which it has gained 1.2%.
The Fed last week projected a more measured pace of rate cuts than markets had been anticipating, pushing both the dollar and U.S. Treasury yields sharply higher.
The dollar index , rose 0.24% to 108.05, holding near two-year highs, with the euro down 0.2% at $1.0408.
Also supporting investor sentiment was the passage of spending legislation by the U.S. Congress on Saturday, which sidestepped a government shutdown.
Traders are pricing in 33 basis points of rate cuts next year, shy of the two 25-bps rate cuts the Fed projected last week. The market is not pricing in more than a 50% chance of a rate cut from the Fed until its May meeting, according to CME's FedWatch Tool.
European Central Bank President Christine Lagarde said the euro zone was getting close to reaching the ECB's medium-term inflation goal, according to an interview published in the Financial Times on Monday.
Trading volumes were likely to be thin in a holiday- shortened trading week as the year draws to a close.
Against the Japanese yen , the dollar strengthened 0.43% to 157.08. The dollar's rise, coupled with the Bank of Japan standing holding rates steady and Governor Kazuo Ueda's comments reducing the odds of a Japanese rate hike next month, have left the yen once again near weak levels that have recently pushed Japanese authorities to intervene to support the currency.
Sterling fell 0.33% to $1.2528. The Bank of England on Thursday kept rates on hold, although the split vote was bigger than anticipated.
Source : Reuters
