U.S. Dollar Gains Momentum Despite Slowing Inflation

U.S. Dollar Gains Momentum Despite Slowing Inflation

Late Trading Sees USD Rally as October’s PCE Data Reflects Slower Inflation; Analysts Weigh in on Dollar’s Month-End Dynamics

The U.S. dollar demonstrated resilience in late trading on Thursday, defying expectations as the latest data revealed a slowdown in U.S. inflation for October. The dollar index, a measure against six major peers, surged by 0.72% to 103.4996, indicating unexpected strength.

PCE Data and Dollar’s Response

The U.S. Bureau of Economic Analysis released data indicating that the annual growth of the Personal Consumption Expenditures (PCE) Price Index in October matched projections, standing at 3.00% and marking a decrease from the previous year’s 3.40%. At the same time, the October Core PCE Price Index aligned with consensus forecasts, registering a 3.50% rate, marking a decrease from the previous 3.70%.

Dollar’s Month-End Dynamics

Despite cooling inflation and a mixed labour market, the U.S. dollar and Treasury yields rebounded from recent lows. Analysts speculated that the dollar’s upswing could be attributed to month-end demand, with investors settling positions for November. This follows a notable decline in the U.S. currency earlier in the month as markets anticipated potential future rate cuts.

Analyst Perspectives on the Dollar’s Movement

Some analysts anticipated a decrease in the dollar’s value by month-end. However, considering the significant surge in equities throughout November, others suggested that the dollar’s rally was unexpected. Vassili Serebriakov, a foreign exchange strategist at UBS in New York, highlighted the anticipated dollar sell-off due to the robust rally in U.S. equities.

Currency Movements

In late New York trading, the euro declined to $1.0890 from $1.0982 in the previous session. The move was influenced by eurozone inflation falling more than forecast. The British pound also saw a decline, reaching $1.2623 from $1.2707 against the U.S. dollar.

Market Dynamics and Future Expectations

The U.S. dollar’s strength against major currencies, despite cooling PCE data, underscores its resilience in the face of changing economic indicators. The market’s response to the PCE data and other economic releases is shaping expectations for the U.S. dollar’s performance in the coming weeks. Analysts are closely monitoring both domestic and global factors that could influence the dollar’s trajectory.