Aussie dollar trades above 68 US cents

Key Movers

Overnight inflation data from the United States released showed an increase in the Consumer Price Index (CPI) in November of 0.1% below the 0.3% of market consensus. According to analysts another moderation in monthly core CPI helps to reaffirm that the USD peak is here. The data comes ahead of the FOMC’s latest forecasts and policy announcement in just over 24 hours. As a consequence of the Consumer Price Index, the terminal Fed rate is now down to 4.86% vs 4.98% prior to the report which is weighing heavily on the US dollar and US Treasury yields. While the market has also pared back further tightening expectations, with a dialled-down 25bps hike in early February now seen as more likely than another 50bps.

The Great British pound also soared sharply following the release of a softer-than-expected inflation report in the United States (US) reported by the Bureau of Labor Statistics (BLS) on Tuesday. In the release, the GBP/USD broke to levels last seen in June 2022, hitting a fresh six-month high at around 1.2442, though it remains volatile in the aftermath of the release of the Consumer Price Index (CPI). In other news UK public sector wages increased by 2.7% in the year to October, according to official figures that will fuel the anger of rail and health sector workers preparing to go on strike in the run-up to Christmas. The headline rate of pay rises for all workers excluding bonuses rose to 6.1% in the three months to October, from 5.7% in September. Ministers have said they will fund a pay rise of 3% for public sector workers and give nurses an average of 4% in line with a pay review body’s recommendations.