Dollar holds above two-month trough ahead of US retail sales

The dollar gained ground in European trade against a basket of major rivals, holding above recent two-month lows after marking the worst daily loss in a year following weak US inflation data for October. 

Such data hurt the chances of another 0.25% interest rate hike in December, with investors now awaiting crucial US producer prices and retail sales data later today.

The Index

The dollar index rose 0.25% to 104.31, with a session-low at 104.05, after closing down 1.5% on Tuesday, the third loss in a row, and the largest in 2023, marking a two-month trough at 103.99. 

US Inflation Data

In the US, consumer prices rose 3.2% y/y in October, slowing down from 3.7% in the previous reading, and below estimates of 3.3%.

Core prices, excluding food and energy, rose 4% y/y, down from 4.1% in the previous reading.

US Rates

Following the data, the odds for a US interest rate hike in December plunged to 1%.

Traders also now expect the Federal Reserve to enact its first interest rate cut in May 2024.

Fresh Data

Now investors await important US retail sales and producer prices data for October later today to gauge the likely path ahead for US policies.

US producer prices are expected down 0.3% m/m in October, while core prices are expected down 0.1% m/m.

On a yearly basis, producer prices are expected up 1.9% in October, slowing down from 2.2% in the previous reading.