The Dollar is Near Multi-Month Highs

The dollar traded higher on Wednesday, benefiting from the strong retail sales during the previous session, while the Pound rallied after the release of sharp inflation that signaled a December rate hike from the Bank of England.

The dollar index, which measures the greenback against a basket of six other currencies, was up 0.1% at 95.938, having earlier touched 96.267 for the first time since July last year.

EURUSD fell 0.1% to 1.1133, after earlier dropping to a 16-month low of $1.1263, while USDJPY rose 0.1% to 114.88, rising to 114.97, the highest level since March 2017.

This has added to the momentum generated last week by consumer prices rising at the highest rate since 1990 and could encourage the US Federal Reserve to accelerate the rollback of its asset purchase program and potentially advance the timetable for rate hikes.

Meanwhile, this week, European Central Bank President Christine Lagarde backtracked on the idea of ​​her central bank raising interest rates soon, warning that tightening monetary policy now to rein in inflation could stifle the eurozone recovery.

Elsewhere, GBPUSD rose 0.3% to 1.3463 after British inflation surged to a 10-year high last month, bolstering expectations that the Bank of England will raise interest rates next month, making it the first G7 central bank. It has been doing so since the outbreak of the pandemic.

It comes the day after stronger-than-expected UK employment data even as the government’s job-protection holiday scheme comes to an end.
USD/AUD slipped 0.1% to 0.7300, with Reserve Bank of Australia Governor Philip Lowe again falling against market rates for a rate hike in 2022.