Dollar Higher Post-CPI; Loonie Outperforms on BOC
The dollar edged higher with Treasury yields after the release of November consumer inflation figures matched estimates, affirming a likely December Fed rate cut but muddying the outlook for future easing. The loonie outperformed G-10 currencies after Bank of Canada signaled cautious easing ahead after cutting the benchmark rate by a half point.
The Bloomberg Dollar Spot Index rises 0.2%, paring earlier advance pre-CPI of as much as 0.4%.
Core and headline CPI figures both increased 0.3% month-over-month, largely as expected.
Swaps markets pricing some 23bp of Fed rate cuts on Dec. 18 versus roughly 20bp before the data; policy-sensitive two-year Treasury yield reverses drop to trade up about 1.6bp to 4.16%.
“Overall, we see the November CPI report clearing the way for a December rate cut while doing little to relieve Fed officials’ increasing wariness about resilient non-shelter inflation amid a strong economy and incoming inflationary policy mix,” wrote BNP Paribas economists Andy Schneider and Britney Jackson.
“Going forward, we will be evaluating the need for further reductions in the policy rate one decision at a time,” BOC statement read.
USD/CAD falls 0.4% to 1.4120 session low while Canada yields trade higher across the curve
“Post-cut CAD is finding support as the bank indicated that any further policy decisions will be made on a meeting by meeting basis,” said Skylar Montgomery Koning, an FX strategist at Barclays. “With the policy rate now at the top of the bank’s neutral range and uncertainty heightened from possible tariffs and holiday tax cuts this more cautious approach to easing makes sense”
USD/JPY rises 0.4% to 152.62, holding gains seen after Bloomberg report said that Bank of Japan officials see a small cost to waiting to hike rates while still being open to a move next week.
Data showed inflation in Japan’s corporate goods prices accelerated to a 16-month high.
EUR/USD falls 0.4%, trades near one-week low at 1.0487.
Source : Bloomberg
