Asian session review: the US dollar is showing positive dynamics

During today's Asian trading, the US dollar rose slightly against major currencies, hitting a more than 2-month high, as the latest US economic data strengthened the case that the Fed will not cut interest rates by another 0.5%.

The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) rose by 0.10% to 103.37. Gradually, the focus of investors' attention is shifting to data on US retail sales and industrial production for September, weekly statistics on applications for unemployment benefits, as well as several reports on the real estate market, which will be released later this week. These reports may affect expectations of a Federal Reserve interest rate cut in November. According to the CME FedWatch Tool, markets see a 94.1% probability of a 0.25% rate cut at the November meeting (compared to 80.3% a week earlier) and a 86.2% probability of a 0.25% rate cut in December (compared to 79.1% a week earlier), with a 0.46% rate cut expected by the end of the year.

The pound fell by 0.6% against the US dollar, as the latest UK inflation data increased the likelihood of another interest rate cut by the Bank of England at the November meeting. The Office for National Statistics (ONS) said that in September consumer prices rose by 1.7% per year after an increase of 2.2% per annum in August. The latest increase was the weakest since April 2021. Economists expected prices to rise by 1.9%. On a monthly basis, the consumer price index remained unchanged after rising 0.3% in August. Consensus estimates suggested an increase of 0.1%. Meanwhile, core CPI - which excludes energy, food, alcohol and tobacco - rose by 3.2% per annum (the lowest value since September 2021) after an increase by 3.6% in August. Consensus estimates suggested an increase by 3.4% per annum. On a monthly basis, core consumer prices rose by 0.1%, compared with the 0.4% increase in August. Economists had expected an increase of 0.3%.

The euro fell 0.1% against the US dollar, reaching its lowest level since August 2, while market participants are preparing for the ECB meeting, the results of which will be announced tomorrow.

Although the ECB began its monetary easing cycle this summer with a more cautious approach, experts believe that the latest economic data from the eurozone is more in line with the more sustained pace of rate cuts by the central bank. In addition to the 25 basis point rate cut expected this week, experts believe that more significant progress in the fight against inflation, combined with concerns about economic growth, will force the ECB to adhere to a more consistent pace of rate cuts in the future. Most likely, the central bank will cut the interest rate by 25 basis points at each of its meetings until the end of the first quarter of 2025, and then move to cut rates quarterly, bringing the deposit rate to 2.00% by the end of 2025.