The dollar took a breather on Wednesday, hovering around 102.5 after a recent climb. Investors are holding their breath, waiting for crucial US inflation data that could determine the Federal Reserve’s next move. This data could be the deciding factor: will interest rates start dropping as soon as March, or will they hold steady for a while longer?
Just a week ago, nearly everyone thought a March rate cut was a sure thing. Now, with the odds down to 64%, some experts say May is a more likely starting point for the Fed’s easing cycle. Why the change of heart? Two main reasons: the US job market is still booming, and inflation, while showing signs of cooling, remains stubbornly above the Fed’s 2% target.
In other economic news, the November trade deficit unexpectedly shrank. Falling imports of consumer goods, due to softer domestic demand, seem to be the culprit. This could be a sign of Americans tightening their belts, but it also suggests businesses might be stocking up before potential interest rate hikes.
While the dollar held its ground against most currencies, it slipped a bit against the Australian dollar. Could this be a hint of things to come, with other currencies gaining strength as the Fed hesitates to cut rates?
Stay tuned for the upcoming inflation data! It could be the spark that sets the dollar on a new course, impacting everything from your grocery bill to your vacation plans.