On Tuesday, the dollar sank to a two-week low as data revealed that consumer prices climbed in January but at the slowest annual rate since October 2021, confirming concerns that the Federal Reserve is reaching the end of its monetary policy tightening cycle.
The US dollar climbed initially when the data was released, but then sank across the board a few minutes later.
According to figures from the Labor Department, the Consumer Price Index jumped 0.5% last month after increasing 0.1% in December. Rising fuel costs, which jumped 3.6% in January, contributed to monthly inflation.
However, the CPI rose 6.4% in the year to January, the weakest advance in roughly 1-1/2 years, and followed a 6.5% rise in December. The annual CPI reached 9.1% in June, the highest level since November 1981.
The dollar index slipped 0.2% in early trading to 102.93. It fell as low as 102.50, its lowest level since February 3. The dollar fell 0.1% against the yen to 132.34. The euro rose 0.3% to $1.0754 after the report, reaching a two-week high of $1.0805.
“The narrative remains unchanged that the Fed will eventually slow down,” said Adam Sarhan, chief executive officer at 50 Park Investments in New York.
“It is: raising rates, stop raising rates and then possibly cut rates down the road in the future and avoid a hard landing, completing their goal of a soft landing.”
The price of futures contracts revealed that traders are aggressively wagering that the Fed will raise rates by a quarter percentage point at each of its sessions in March and May.
The Fed’s benchmark overnight interest rate is now targeted at 4.50%-4.75%.