US dollar mixed as inflation data backs smaller Fed rate cut

Reuters

US dollar mixed as inflation data backs smaller Fed rate cut

Sep 11, 2024 at 1:48 pm GMT

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U.S. core inflation rises 0.3% in August

U.S. dollar hits three-week high vs Swiss franc

Fed funds futures price smaller odds of 50-bp cut this month

Adds analyst comment, details, byline, bullets, FX table, updates prices

By Gertrude Chavez-Dreyfuss

NEW YORK, Sept 11 (Reuters) -The U.S. dollar was mixed overall on Wednesday in choppy trading after data showed underlying inflation in the world's largest economy rose in August, reinforcing expectations that the Federal Reserve will likely undertake a smaller rate cut of 25 basis points later this month.

The greenback posted gains against the Swiss franc, sterling, and euro, pushing the dollar index, a measure of the U.S. unit's worth againstsix currencies, 0.1% higher on the day at 101.69 =USD.

Data showed that the U.S. consumer price index grew 0.2% last month after climbing 0.2% in July. In the 12 months through August, the CPI advanced 2.5%, the smallest year-on-year rise since February 2021, and followed a 2.9% increase in July.

But excluding the volatile food and energy components, the CPI climbed 0.3% in August after rising 0.2% in July.

"The immediate takeaway is that this dramatically reduces the likelihood of a 50 basis-point rate cut in September next week," said Ben McMillan, principal and chief investment officer, at IDX Insights, in Tampa, Florida.

"That wasn't unexpected because I thought the market was pretty aggressive at pricing in a 50-basis point rate cut in September anyway. This reaffirms what the Fed is really focused on - the jobs numbers. This makes the jobs numbers, and the revisions to those numbers, even more important."

In midmorning trading, the dollar was up 0.4% against the Swiss franc at 0.85 franc CHF=EBS, after earlier hitting a three-week high of 0.8544 following the inflation report.

Sterling dipped 0.2% against the dollar to $1.3050 GBP=D3.

Versus the yen, the dollar hit the day's high of 142.54 yen following the CPI numbers, before sliding 0.2% to 142.15 JPY=EBS. The yen got an extra boost earlier when Bank of Japan board member Junko Nakagawa reiterated the central bank would keep raising rates if the economy and inflation justified it.

Following the U.S. data, the rate futures market has priced in just a 15% chance of a 50-bp easing by the Fed at the September meeting, down from about 33% late on Tuesday, LSEG calculations showed.

The market though still factored in more than 100 bps in cuts this year.

Currency bid prices at 11 September 01:32 p.m. GMT
Description	RIC	Last	U.S. Close Previous Session	Pct Change	YTD Pct	High Bid	Low Bid
Dollar index	=USD	101.71	101.64	0.07%	0.34%	101.81	101.26
Euro/Dollar	EUR=EBS	1.1016	1.102	-0.04%	-0.21%	$1.1055	$1.1004
Dollar/Yen	JPY=D3	142.32	142.46	-0.07%	0.93%	142.5	140.72
Euro/Yen	EURJPY=	1.1016	156.95	-0.11%	0.74%	157.01	155.51
Dollar/Swiss	CHF=EBS	0.8502	0.847	0.4%	1.04%	0.8544	0.8423
Sterling/Dollar	GBP=D3	1.3052	1.308	-0.2%	2.57%	$1.3112	$1.3047
Dollar/Canadian	CAD=D3	1.3597	1.361	-0.08%	2.59%	1.3617	1.3574
Aussie/Dollar	AUD=D3	0.6648	0.6653	-0.05%	-2.48%	$0.6674	$0.6636
Euro/Swiss	EURCHF=	0.9364	0.9332	0.34%	0.84%	0.9381	0.9308
Euro/Sterling	EURGBP=	0.8439	0.8424	0.18%	-2.64%	0.8446	0.8422
NZ Dollar/Dollar	NZD=D3	0.6124	0.615	-0.39%	-3.06%	$0.6155	0.6115
Dollar/Norway	NOK=	10.8589	10.8407	0.17%	7.14%	10.878	10.7894
Euro/Norway	EURNOK=	11.9628	11.9468	0.13%	6.58%	11.9729	11.9198
Dollar/Sweden	SEK=	10.3956	10.3734	0.21%	3.26%	10.4138	10.3269
Euro/Sweden	EURSEK=	11.4521	11.4313	0.18%	2.94%	11.4692	11.4115