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Greenback might stay weak over holidays
The US dollar was mostly lower overnight after a shock lower-than-expected US inflation report. The report means the US Federal Reserve might be willing to cut interest rates in January and could keep pressure on the USD over the holiday break.
The AUD/USD climbed from two-week lows to gain 0.1%. For now, topside targets for the AUD/USD look to major resistance at 0.6700, with orders expected just below this level.
The NZD/USD was flat.
Later today, all eyes will be on the Bank of Japan. The BoJ is widely expected to hike rates by 25 bps to 0.75%, but the central bank’s commentary could drive volatility.
The USD/JPY fell ahead of the BoJ, down 0.1%. USD/SGD fell 0.1%, while USD/CNH lost 0.2%.
US inflation undershoots all forecasts in November
US inflation unexpectedly fell to 2.7% in November, well below the consensus forecast of 3.1%, while core CPI rose just 2.6% — the lowest since 2021. The softer print strengthens the case for Fed doves to push for additional rate cuts if December data weakens further. It also eases stagflation concerns, reviving a “Goldilocks” narrative for equities.
The sharp downside surprise may have been exaggerated by data collection disruptions during the federal shutdown, but markets seized on the signal. The S&P 500 snapped a four-day losing streak with a 1% gain, Bitcoin jumped 3%, and talk of a Santa rally resurfaced.
Meanwhile, Treasury yields dropped across the curve, and the US dollar depreciated against all of its major peers. The dollar’s losses were capped somewhat by more data showing labour market resilience; weekly initial claims fell by 13,000 to 224,000, bringing the four-week average to 217,000.
Bottom line: The inflation miss is a clear catalyst for more Fed easing, keeping the dollar under pressure and risk assets buoyant into year-end.
Pound enjoys limited relief rally after BoE cut, ECB sticks to script
Sterling strengthened across the board yesterday after the Bank of England (BoE) cut rates as expected. GBP/USD spiked back above $1.34 and GBP/EUR above €1.14, the former stretching higher after the US CPI surprise.
The BoE cut its benchmark interest rate by 25 bps to 3.75% as expected, with the vote split at 5–4. We had cautioned that the greater risk lay not in the cut itself, but in a narrow split that would disappoint doves and leave scope for sterling to strengthen. With pessimism already embedded in GBP, stretched short positioning, and sterling’s still attractive carry profile, the setup was primed for a contrarian move, and the post-decision rally in the pound reflected that dynamic.
Meanwhile, the European Central Bank (ECB) left its benchmark rate unchanged at 2% for the fourth consecutive meeting, reiterating its “data-dependent, meeting-by-meeting” guidance. The euro erased earlier losses against the dollar, helped by softer US inflation figures.
Staff projections were the main takeaway: Eurozone GDP growth for 2025 was revised up to 1.4% (from 1.2%), while the 2026 forecast rose to 1.2%. Inflation is now expected at 1.9% in 2026, edging closer to the ECB’s 2% target. With inflation broadly at or below target and growth near potential, the central bank has little reason to shift policy in either direction for now.
USD lower after CPI
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 15 – 20 December
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
