TSX gains after CPI shows US inflation rose 3%
Investing.com - The U.S. dollar edged higher Friday in subdued trading ahead of the release of key inflation data, which could provide cues on the full extent of the Federal Reserve’s rate-cutting cycle.
At 04:20 ET (08:20 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher to 98.825, on track for a weekly gain of around 0.6%.
Dollar edges higher
The U.S. consumer price index report for September is expected to be released later in the session, having been delayed as a consequence of the government shutdown, and is likely to play a key role in shaping expectations for Federal Reserve monetary policy this year.
Economists expect a 0.4% increase for the headline number and a 0.3% rise in the core figure month-on-month.
The Fed is widely expected to cut rates next week by 25 basis points, but this release could provide cues on what the central bank might do in its December meeting.
“Despite tariff-led price pressure in some sectors, there are indications that airfares, hospitality and housing should be a drag on the CPI basket,” said ING analyst Francesco Pesole. “With headline and core close to 3.0%, the Fed can cut and signal more easing ahead when it meets next week. But markets are fully pricing in 50bp by year-end, and without any jobs data at hand, it will be hard to speculate much beyond the December meeting.”
Traders are also digesting the news that U.S. President Donald Trump will meet his Chinese counterpart Xi Jinping in South Korea during next week’s APEC summit, as well as new U.S. sanctions on major Russian suppliers Rosneft and Lukoil over Russia’s war in Ukraine.
“A few reports now suggest some Indian and Chinese refineries are considering halting imports of Russian oil. A meaningful reduction in Russian oil supply (which we didn’t see after previous sanctions) could drive Brent prices back to the 70-75$ range.
These are levels that would drive some noticeable dollar appreciation,” Pesole added.
Euro climbs to one-week high
In Europe, EUR/USD traded marginally lower at 1.1616, even as data showed that Germany’s private sector recorded its strongest growth in nearly two-and-a-half years in October, buoyed by a robust rise in services activity.
The HCOB preliminary German flash composite Purchasing Managers’ Index, compiled by S&P Global, rose to 53.8 in October from 52.0 in September, marking the fastest growth since May 2023 and surpassing analysts’ expectations of 51.5.
“The downside risks for EUR/USD have increased a bit due to the possibility of further oil rallies, but for now we expect 1.160 to continue being the short-term anchor,” Pesole added.
GBP/USD slipped 0.1% lower to 1.3312, despite U.K. retail sales rising by more than expected in September, suggesting the country’s consumers may be faring better than previously thought.
Retail sales increased by 0.5% on the month in September, a small drop from the revised higher 0.6% growth the previous month, according to data released by the Office of National Statistics data earlier Friday.
Yen slips after inflation, PMI data
Elsewhere, USD/JPY traded 0.2% higher to 152.85, with the Japanese currency slipping despite data showing that the country’s core consumer inflation rose 2.9% in September from a year earlier, while the broader “core-core” measure -- which excludes both food and energy -- climbed 3.0%.
The readings remain above the Bank of Japan’s 2% target, fueling expectations that policymakers may further discuss an eventual tightening.
That said, Japan’s factory activity for October slipped to its weakest level in 19 months, signaling continued contraction in factory output. The services PMI also eased, but remained strong amid robust domestic demand.
USD/CNY traded largely unchanged at 7.1223, even after the White House said U.S. President Donald Trump will meet Chinese President Xi Jinping on the sidelines of events in Seoul, raising hopes for progress in U.S.-China trade relations.
AUD/USD fell 0.1% to 0.6503, and NZD/USD gained 0.1% to 0.5752.