Dollar rises as hot U.S. inflation cools Fed rate cut bets
By Joice Alves
LONDON (Reuters) -The dollar rose to a fresh three-month high against major peers as traders pushed back bets for a Federal Reserve interest rate cut following surprisingly hot U.S. inflation figures.
Since data Tuesday showed the U.S. consumer price index (CPI) in January gained 3.1% from a year earlier, versus an expected 2.9% rise, money markets have priced in no Fed cut in March and a 53% chance of a cut in June, according to ME Group.
The dollar index, which measures the U.S. currency against six major peers, traded 0.05% higher at 104.91, having touched a fresh three-month high of 104.97.
«Hot U.S. January CPI has closed the door for a March Fed rate cut. While PCE data will be more important, the debate has shifted to May or June for the start of the Fed’s easing cycle, unless banking risks escalate,» said Saxo’s Head of FX Strategy, Charu Chanana.
«This has made dollar strength more durable as risks of SNB (Swiss National Bank) and ECB (European Central Bank) rate cuts ahead of the Fed could gain traction.»
UK INFLATION
Against the British pound, the dollar rose 0.35% to $1.2548, briefly touching a eight-day high after data showed UK inflation did not accelerate in January as expected. This may relieve some of the pressure on the Bank of England (BoE) to keep rates where they are for longer.
UK inflation stood at an annual rate of 4.0% in January, unchanged from December. Economists polled by Reuters had forecast an increase to 4.2%.
«Base effects should now set up a very sharp fall in the annual inflation rate in the next four months,» said Michael Metcalfe, Head of Macro Strategy at State Street (NYSE:STT) Global Markets.
«This may yet be enough based on January’s benign reading to get the
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