Dollar Falls to Multi-Month Low Following Lower Inflation Figures

After falling the previous night on lower-than-expected inflation statistics, the dollar (USD) was trading around its worst levels in months against the euro (EUR) and the pound (GBP) on Wednesday. This reinforced speculation that the US Fed will announce a slower rate hike path.

The US apex bank is largely expected to raise interest rates by 50 basis points (bp) when it wraps up its two-day meeting on Wednesday, following four consecutive 75-bp hikes.

Dollar Traders to Focus on Super Central Bank Week Outcome

Traders will then concentrate on the Bank of England (BoE) and European Central Bank (ECB) meetings on Thursday, when a rate increase of 50 basis points is also expected.

In the previous session, after US CPI data, the euro was stable against the dollar at $1.0642, not far from a six-month intraday high of $1.0673.

The pound, which also reached a six-month high following the US results, remained unchanged at $1.2376 after briefly falling when British inflation data also revealed a more dramatic decline than anticipated.

However, year-over-year inflation of 10.7%, versus a projected 10.9%, continues to be excruciatingly high for British consumers.

According to the Labor Department’s data released on Tuesday, underlying consumer prices increased by the least amount in 15 months in November, falling short of expectations for a second consecutive month.

That information helps to support the prevailing consensus that the Fed will sluggishly raise interest rates by 50 basis points. The Fed’s quarterly “dot plot,” which depicts where policymakers estimate rates to be at the end of each year, and remarks from head Jerome Powell will therefore be the main topics of discussion on Wednesday.

It is commonly anticipated that the median “dot” for the level by the end of 2023 would grow from the 4.625% prediction at the end of September, but the main question is by how much.