Mixed USD, CHF weakens on big SNB rate cut – Scotiabank

The US dollar (USD) is mixed against its major peers, notes Shaun Osborne, chief FX strategist at Scotiabank.

USD mixed against major currencies as markets digest inflation data

“The DXY shows a minor gain in the session, due to losses in the CHF after the SNB cut its policy rate by 50 bps, more than expected, and a slight drop in the GBP. It is worth noting that the bank Brazil’s central bank increased the Selic rate by 100 bps, more than expected (to 12.25%) yesterday afternoon. However, most other major currencies remain stable or slightly firmer, with the. AUD leading gains following a stronger-than-previously expected jobs report (a 35.6k increase in jobs, led by full-time work, and a drop in the unemployment rate to 3.9% – vs. “Short-term rates rose modestly and swaps have reduced the odds of an RBA rate cut in February to 50/50.”

“Yesterday’s US inflation data was in line with expectations, but that was perhaps the limit of the good news. Core and underlying trend measures of inflation increased and, although these increases were modest, they support the impression that the disinflation process in the US has stalled Markets added a couple more basis points to the anticipated easing at next week’s FOMC meeting, effectively fully pricing in a 1/4 cut. point and adding marginally to expectations for easing in 2025, but more hawkish-minded Fed policymakers will take note of underlying price trends and a cut next week may be accompanied by a more cautious statement on the potential for rate cuts in 2025.”

“Today’s PPI data may reflect moderate M/M gains, but consensus still expects prices to rise during the year. The BoJ’s Tankan survey for the fourth quarter is released tonight and is expected to reflect business confidence. stable, but relatively firm, towards the end of the year. Rising business optimism supports the prospect of a gradual tightening of the BoJ in the future.”