Dollar Poised for Weekly Decline amid Slowing U.S. Inflation

The dollar's appreciation has stopped amid a new array of evidence that the interest rates may have peaked in the U.S. The DXY Dollar Index Spot has posted its biggest weekly drop in months against the euro, yen and Swiss franc on Friday, November 17, as investors sold off in anticipation of a nearly 100 basis point cut in U.S. interest rates next year.

Meanwhile, a series of weak U.S. economic data published on Thursday also reinforced this position. Thus, the U.S. inflation fell to 3.2% in October, lower than economists had expected and the first decline in 4 months. Consumer prices somewhat moderated and rose at a 3.2% annualized rate in October, down from an annualized rate of 3.7% in September. The annualized increase was slightly less than economists had forecast, and prices were virtually unchanged MoM.

At 1.0861 per euro, the dollar lost ~1.6% for the week, the sharpest drop since mid-July. It also fell 1.6% for the week to 0.8882 against Swiss francs and even lost 0.6% to trade at 150.53 against the Japanese yen, catching off-guard the speculators.

Futures markets priced in a 98 basis point cut in the Fed Funds rate next year, up from 73 basis points a week ago.