Sundiata Post – The dollar softened on Thursday, while the euro hovered near an eight-month high following data indicating slow US inflation, fueling expectations of a potential Federal Reserve rate cut next month.
The yen held steady at 147.315 per dollar after Japan’s economy grew at an annualized 3.1% in Q2, driven by strong consumption, keeping the possibility of a rate hike on the table.
Despite moving away from last week’s seven-month high of 141.675 per dollar, the yen remains well above the 38-year low of 161.96 seen in early July. Tokyo’s intervention and a surprise rate hike from the Bank of Japan in July disrupted investor bets on the yen, boosting its strength.
In the US, the Consumer Price Index showed a moderate rise, slowing annual inflation to below 3% for the first time since early 2021.
This, along with a mild increase in producer prices, suggests inflation is trending downward, though traders are now less confident in aggressive Fed rate cuts.
Market predictions show a 64% chance of a 25 basis point (bps) cut in September, with a 36% chance of a 50 bps cut. The Fed is expected to deliver 100 bps in cuts this year, starting with measured reductions to benefit risk assets, according to Bank of Singapore’s chief economist.
Elsewhere, the euro was steady at $1.1011, close to an eight-month high, while the dollar index remained near its recent lows.
The Australian dollar gained after strong employment data, and the New Zealand dollar recovered slightly after a rate cut. Meanwhile, China’s yuan weakened due to disappointing factory output data.
