Written by Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) – The U.S. dollar weakened on Wednesday as investors ruled out a deep interest rate cut by the Federal Reserve at its next policy meeting and priced in a possible election victory by former President Donald Trump. It rose to an 11-week high. .
Meanwhile, the pound fell to its lowest in two months and the euro fell to its lowest in 11 weeks ahead of the European Central Bank meeting, as weaker-than-expected UK inflation data gave the Bank of England scope for stronger interest rate cuts. It fell to an all-time low. .
But with the U.S. presidential election just weeks away, investors’ focus has shifted to the highly anticipated race, along with the Fed’s interest rate moves.
President Trump’s plans for tax cuts, financial deregulation and higher tariffs are seen as positive for the dollar. For example, higher tariffs could negatively impact the growth of exporters in Asia and Europe, force central banks to cut interest rates, and cause currencies to weaken while the dollar appreciates.
Amo Sahota, executive director of currency consulting firm Clarity FX in San Francisco, said he expects some major central banks to cut interest rates more sharply than the Fed because the economy is slowing much faster than the U.S. economy. It was pointed out that That supported the dollar.
He also noted Trump’s interview with Bloomberg News Editor-in-Chief John Micklethwait on Tuesday at the Economic Club of Chicago, in which the former president called for high tariffs on U.S. trading partners. We doubled down on our plans to impose.
“Trump worked really hard on tariff negotiations…but he also insisted that he would do whatever it took to stop people from flooding the market with foreign products at the expense of American products. I think it’s just that.”
“This, combined with overnight polls showing Trump with a narrow lead here, is enough to keep the dollar at an all-time high.”
In afternoon trading, the dollar rose 0.3% to $103.59, after hitting an 11-week high of $103.60.
The euro, the biggest component of the dollar index, fell 0.4% to $1.0855, after falling to $1.0853, its lowest since early August.
Investors are keeping an eye on Thursday’s ECB Governing Council meeting, but if policymakers deliver on the currently priced-in 25bp rate cut and President Christine Lagarde doesn’t give too many clues about the rate outlook, markets will impact may be weakened.
sterling pressure
Meanwhile, the pound was one of the biggest movers among major currencies, falling 0.7% to $1.2982. The annual consumer price inflation rate fell below the $1.30 level for the first time since Aug. 20, following data showing the rate fell to 1.7% in September from 2.2% in August.
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This was the lowest level since April 2021 and was below the 1.9% forecast in a Reuters poll of economists. This strengthened expectations that the central bank would cut interest rates next month, raising the possibility of another rate cut in December.
The euro was last up 0.5% against the pound at 83.62 pence.
LSEG estimates that U.S. traders are pricing in a 97% chance of a 25 basis point rate cut and a 3% chance of a pause when the Fed makes its next policy decision on Nov. 7. A month ago, traders thought the odds of a huge 50 basis point cut were 50-50.
The dollar rose 0.4% against the yen to 149.765 yen, not far from Monday’s high of 149.98 yen since Aug. 1.
Bank of Japan board member Seiji Adachi said on Wednesday that the central bank needs to raise interest rates at a “very gradual” pace and avoid premature rate hikes, given uncertainties about the global outlook and domestic wage trends. Ta.
In other currencies, the Australian and New Zealand dollars fell as skepticism about stimulus plans from China, its largest trading partner, fell.
The Australian dollar fell to US$0.6659, its lowest since September 12, and was last traded 0.6% lower at US$0.6663. New Zealand shares fell to US$0.6041, the level of August 19, and were last down 0.4% at US$0.6057.
Currency bid price on October 16th at 7:37pm (GMT)
Description RIC Last US End Change Rate of Previous Session YTD Percentage High Bid Low Bid
Dollar Index 103.55 103.26 0.29% 2.15% 103.6 103.17
EUR/USD 1.0859 1.0893 -0.31% -1.62% $1.0902 $1.0854
USD/JPY 149.76 149.23 0.36% 6.18% 149.795 148.88
EUR/JPY 1.0859 162.48 0.09% 4.49% 162.88 162.13
Dollar/Switzerland 0.8654 0.8622 0.39% 2.84% 0.8658 0.8615
GBP/USD 1.2981 1.3074 -0.71% 2.01% $1.3075 $1.298
USD/Canada 1.3755 1.3775 -0.13% 3.77% 1.3793 1.3756
Australia/Dollar 0.6663 0.6703 -0.58% -2.25% $0.6705 $0.6659
Euro/Switzerland 0.9397 0.9389 0.09% 1.2% 0.9412 0.9379
Euro/pound 0.8362 0.8331 0.37% -3.53% 0.838 0.8327
NZ$/USD 0.6056 0.6083 -0.43% -4.15% $0.6086 0.6041
Dollar/Norway 10.9205 10.7989 1.13% 7.75% 10.936 10.8073
Euro/Norway 11.8599 11.7821 0.66% 5.67% 11.889 11.7724
USD/Sweden 10.5086 10.4016 1.04% 4.39% 10.518 10.4032
Euro/Sweden 11.4128 11.3441 0.61% 2.58% 11.419 11.3324
(Reporting by Gertrude Chavez-DreyfusS; Additional reporting by Alun John in London and Kevin Buckland in Tokyo; Editing by Jamie Freed, Sherry Jacob-Phillips, Angus MacSwan, Alexandra Hudson and Diane Craft)