Investing.com – The US dollar rose on Monday and remained at elevated levels following stronger-than-expected US payrolls data, while sterling continued to struggle for friends.
At 04:35 ET (09:35 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.4% higher at 109.930, after hitting its strongest level since October 2022 on Friday.
Dollar Firmly Ahead of CPI
The dollar has received a boost after data on Friday showed U.S. growth unexpectedly accelerated in December, while growth fell to 4.1%, prompting traders to scale back bets on Federal Reserve rate cuts this year.
Markets are now pricing in just 27 basis points of Fed rate cuts this year, down from about 50 basis points at the start of the year.
“Friday’s strong job growth in the US has pushed the dollar higher again. “It is difficult to see the dollar’s trend changing this week given the prospect of another strong set of US inflation data, which will increasingly raise questions about whether the Fed should cut rates at all this year,” ING analysts said . remark.
December US inflation figures are due to be released on Wednesday, and any upside surprise could completely close the door to easing.
The pound sterling remains weak
In Europe, it traded 0.7% lower at 1.2117, with sterling falling to a 14-month low after falling 1.8% last week amid growing unrest over the UK finances, leading to rising borrowing costs.
“Sterling continues to trade on a soft basis and losses could widen further this week,” ING said. “Wednesday will be the biggest day for sterling as this is when the UK CPI data for December is released. Sterling could well get hit, regardless of the number that comes out. Persistent inflation and what this means for the Bank of England cycle could spell more trouble for the UK government bond market.”
fell 0.4% to 1.0195, falling to the weakest level since October 2022, with rates widely expected to fall by around 100 basis points in 2025, with most cuts coming in the first half of the year, because inflation is expected to rise. the bank’s 2% target by mid-2025.
“With US yields rising and the dollar doing very well (up 8% since the end of September), it wouldn’t be a surprise to see some central bankers ease up on some easing to provide some support to their beleaguered currencies,” said ING. .
“However, today Philip Lane, the European Central Bank’s chief economist, has preferred to say that without further cutting rates the ECB’s inflation target would be at risk. It therefore appears that the ECB is not particularly concerned about soft EUR/USD levels as calls for parity grow louder.”
Yuan has no support
In Asia, the index fell 0.3% to 157.23, with volumes hit by the holiday in Japan and as traders remain uncertain about a meeting.
rose 0.3% to 7.3574 even as data showed China’s economy grew stronger than expected in December, helped by excessive exports.
But the outcome was largely related to exporters pre-loading their shipments before newly-elected US President Donald Trump imposed steep trade tariffs on the country. Trump – who will take office on January 20 – has promised to impose tariffs on China from “day one” of his presidency.
