Investing.com – The US dollar rose higher on Monday, recovering from sharp losses late last week on signs of easing inflation pressures, while the euro fell after dovish comments from ECB head Christine Lagarde.
At 05:00 ET (10:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.4% higher at 107.750, following a sharp decline from a two-year high year on Friday.
The dollar is bouncing after a sharp pullback
The dollar rebounded on Monday after falling sharply on Friday as the US central bank showed moderate monthly price increases, with a measure of underlying inflation posting its smallest gain in six months.
That allayed some concerns about the possible cut in rates in 2025, which had risen on the hawkish U.S. rate outlook after the last Fed policy meeting of the year.
That said, traders are pricing in 38 basis points of rate cuts next year, short of the two 25 bp rate cuts the Fed forecast last week, with the market delaying the first easing of 2025 until June, with a cut in March from a price of 38 basis points. about 53%.
Trading volumes are likely to decline as the end of the year approaches, with this trading week shortened by the festive period.
Eurozone “very close” to the ECB’s inflation target
In Europe, inflation fell 0.1% to 1.0414, near the two-year low it reached in November, and fell 5.5% this year after the European Central Bank president said the euro zone came “very close” to achieving the central bank’s medium-term inflation target. .
“We are getting very close to that stage where we can declare that we have brought inflation to our medium-term 2% target in a sustainable way,” Lagarde said in an interview published by the Financial Times on Monday.
Earlier in December, Lagarde had said the central bank would cut interest rates further if inflation continued to decline towards the 2% target, saying curbs on growth were no longer necessary.
The country cut its key interest rate for the fourth time this year last week and is likely to cut rates further in 2025 as inflation concerns subside.
traded largely flat at 1.2571 after data showed the UK economy failed to grow in the third quarter, adding to signs of an economic slowdown.
The Office for National Statistics cut its estimate for the change in output from a previous estimate of 0.1% to 0.0% in the July to September period.
The ONS also cut its estimate for second-quarter growth to 0.4% from 0.5% previously.
Policymakers voted 6-3 last week to leave rates unchanged, a bigger split than expected, amid concerns about a slowing economy.
The yuan reaches a one-year high
In Asia, it rose 0.2% to 156.72, after rising to 158 last week on easing signals from the .
The BOJ indicated that it is not considering rate hikes in the near term, despite a recent rise in inflation, and that it could not raise rates until March 2025.
rose 0.2% to 7.3080, hitting a one-year high, as traders continued to worry about China’s economic prospects. While Beijing is expected to increase fiscal spending in the coming year to support the economy, looser monetary conditions are expected to undermine the yuan.
