As US Dollar Plummets Post-CPI, Will Fed Ease Rate Hiking?

The dollar falls sharply on Thursday after US consumer prices for October rose less than expected and pointed to underlying inflation having peaked, this reading has been the sort of data that markets cheered for as it could allow the Fed to ease up on aggressively hiking interest rates.

The consumer price index rose 0.4% in October to match the prior month’s increase, the Labor Department said. Economists polled by Reuters had forecast the CPI would advance 0.6%.

Excluding volatile food and energy, core CPI increased 0.3% month-over-month after gaining 0.6% in September. The dollar’s tumble sparked spikes higher in the yen and other exchange rates, stirring speculation the Bank of Japan’s intervention in markets.

The sharp drop in the dollar was due to the decline in Treasury yields. Everything is reacting to the sharp declines markets are seeing in rates. This has been a strong dollar regime. Now people are having a change of heart today” in their view of the market.

The yen and sterling notched their biggest single-day gains since 2016 and 2017, respectively, as the dollar and Treasury yields plunged.