Dollar Weakens Slightly But the depreciation wasn’t much as it was still supported by Producer Price Index (PPI) data which rose more than expected. This will be the factor that will encourage the US Federal Reserve (Fed) to go ahead with raising interest rates.
This week has been quite active. Four central banks, including the Fed, will hold their final policy meeting this year. While the US will also release the US Consumer Price Index (CPI) on December 13.
As of 7:01 pm local time, the dollar index, which measures the greenback against a basket of six major currencies, fell 0.09% to 104.72.
The dollar weakened 0.32% against the euro to 1.0564 euros and 0.15% against the pound to 1.2276 pounds, but gained 0.20% against the yen at 136.82 yen .
The US Department of Labor has released PPI, a measure of inflation on manufacturers’ spending. November The PPI figure was higher than analysts’ expectations. and dashed hopes that US inflation had peaked.
Core PPI, which includes food and energy, rose 7.4% in November year-on-year. This was above analysts’ expectations of 7.2%.
Month-on-month, the headline PPI rose 0.3% in November, beating analyst expectations by 0.2%.
Core PPI, which excludes food and energy, rose 6.2% in November year-over-year. This was above analysts’ expectations of 5.9%.
On a month-to-month basis, core PPI rebounded 0.4% in November, beating analyst expectations by 0.2%.
Investors are watching the Consumer Price Index (CPI) on Dec. 13 and the Fed’s monetary policy meeting on Dec. 13-14, the last meeting of the year.
Markets will also keep an eye on Fed Chairman Jerome Powell’s statement on the direction of Fed interest rates in 2023, as well as the release of official interest rate forecasts (Dot Plots) at the meeting. This will signal the Fed’s interest rate outlook through 2025.
Investors expect the Fed to hike interest rates by 0.50% to a range of 4.25 to 4.50% in this round of meetings. after climbing 0.75% four consecutive times While Mr. Powell signaled the Fed will slow down with a rate hike in December.
Markets also expect the Fed to raise interest rates above 5.00% mid-next year after the release of a solid nonfarm payroll report. This indicates that the Fed’s monetary policy tightening in the past has not been able to dampen the heat in the labor market. This has led to expectations that the Fed will continue to raise interest rates next year to slow the economy and stem a spike in inflation.
