Investing.com – The US dollar rose on Monday, staying at higher levels after 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, traded 0.4% higher to 109.930, after hitting its strongest level since October 2022 on Friday.
Firm dollars before CPI
The dollar gained after Friday's data showed US growth unexpectedly slowed in December while falling to 4.1%, leaving traders to pay off bets the Federal Reserve will cut rates this year.
Markets are now pricing in just 27 basis points worth of a Fed rate cut this year, down from about 50 bps earlier in the year.
“Friday's US jobs release gave another leg up to the dollar. It is difficult to see how the dollar changes this week given the prospect of another strong set of US inflation data, which will raise the question of whether the Fed wants to cut rates this year at all,” said ING analysts, Comment.
Wednesday sees the release of December US inflation, and any surprise could threaten to close the door to a full slowdown.
Sterling remains weak
In Europe, it traded 0.7% lower to 1.2117, with sterling falling to a 14-month low, after falling 1.8% last week, amid growing dissatisfaction with British currencies, which are causing rising borrowing costs.
“Sterling continues to trade at a soft level and its losses may extend this week,” added ING. “Wednesday will be the most important day for sterling when the December UK CPI data is released. Sterling can be beaten regardless of the number that comes out. Sticky inflation and what it means for a Bank of England cycle could spell big trouble for UK retail.
fell 0.4% to 1.0195, down to its weakest level since October 2022, it is widely expected to cut interest rates by around 100 basis points in 2025, with most of the cuts coming in the first half of the year as inflation has been seen heading towards e. 2% is the bank's target by mid-2025.
“With US inflation rising and the dollar doing very well (up 8% since late September) it wouldn't be surprising to hear a few bankers turn a little dovish to support their lower holdings,” ING said. .
“However, in Hong Kong today, European Central Bank Economist Philip Lane chose to say that without further rate cuts, the ECB's inflation target will be at risk. So it seems that the ECB is not worried about the soft EUR/USD levels as equity calls grow stronger.”
The Yuan has no support
In Asia, it fell 0.3% to 157.23, with volumes affected by the holiday in Japan, and as traders remain uncertain of the meeting.
rose 0.3% to 7.3574, as data showed China grew more than expected in December, helped by exports.
But the reading was mostly tied to exporters loading their goods before US President-elect Donald Trump imposed tariffs on the country. Trump – who will take office on January 20 – has vowed to impose tariffs on China from “day one” of his presidency.