NEW YORK (Reuters) – The dollar dropped sharply on Wednesday after data showed U.S. consumer prices rose less than expected in March, raising expectations that the Fed is likely to stop hiking rates after a possible increase in May.
The Consumer Price Index (CPI) climbed 0.1% last month, below economists’ expectations for a 0.2% gain, and down from a 0.4% increase in February. In the 12 months through March, the CPI increased 5.0%, the smallest year-on-year gain since May 2021. The CPI rose 6.0% on a year-on-year basis in February.
Excluding the volatile food and energy components, the CPI increased 0.4% last month after rising 0.5% in February. Sticky rents continued to drive core CPI.
“Headline inflation coming down more than expected is backing the view of the Fed being basically one more and done,” said Joe Manimbo, senior market analyst at Convera in Washington, D.C.
“The market was just really cautious ahead of the data, as if it had been hotter than expected it might suggest that June might also be a live meeting. But I think with inflation taking a big step down from 6% to 5%, if that sustains, that could give the Fed leeway to cut rates later this year if we see a sharp slowdown in the economy,” Manimbo added.
The dollar index was last at 101.68, down 0.41% on the day and below the level of around 102.11 before the data. The euro reached $1.09900, the highest since Feb. 2, and was last at $1.0967, up 0.48% on the day. The dollar dipped to 133.04 Japanese yen, from around 133.85 before the data.
Fed funds futures traders are pricing in 69% probability that the Fed will raise rates by an additional 25 basis points at its May 2-3 meeting, down from around 76% before the data.
Retail sales data on Friday will be analyzed next for how consumer spending is being affected by higher prices.
The Fed will release minutes from its March 21-22 meeting later on Wednesday.
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Currency bid prices at 9:10AM (1310 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Dollar index 101.6800 102.1200 -0.41% -1.749% +102.1600 +101.5000
Euro/Dollar $1.0967 $1.0914 +0.48% +2.34% +$1.0990 +$1.0913
Dollar/Yen 133.0400 133.7100 -0.49% +1.48% +134.0400 +132.7400
Euro/Yen 145.92 145.89 +0.02% +4.01% +146.3800 +145.7900
Dollar/Swiss 0.8978 0.9034 -0.61% -2.89% +0.9034 +0.8970
Sterling/Dollar $1.2445 $1.2427 +0.14% +2.91% +$1.2470 +$1.2400
Dollar/Canadian 1.3458 1.3466 -0.07% -0.69% +1.3489 +1.3433
Aussie/Dollar $0.6701 $0.6654 +0.73% -1.68% +$0.6723 +$0.6649
Euro/Swiss 0.9846 0.9855 -0.09% -0.50% +0.9870 +0.9841
Euro/Sterling 0.8810 0.8782 +0.32% -0.37% +0.8819 +0.8781
NZ $0.6224 $0.6192 +0.53% -1.96% +$0.6242 +$0.6184
Dollar/Dollar
Dollar/Norway 10.4500 10.5470 -0.83% +6.57% +10.5670 +10.4130
Euro/Norway 11.4635 11.5157 -0.45% +9.24% +11.5460 +11.4319
Dollar/Sweden 10.3373 10.4583 -0.50% -0.68% +10.4554 +10.3070
Euro/Sweden 11.3384 11.3953 -0.50% +1.69% +11.4125 +11.3225
Source: Economy - investing.com
