On Thursday, the U.S. inflation report was released. The data reflected in the report came amazed the market participants, as a slower growth in consumer prices was registered. The report led to the sharpest daily decline of the U.S. dollar since 2009, as the published data provoked some rumors of possible slowdown in the pace of rate hikes by the Federal Reserve system.
The key inflation gauge in October turned out to be lower than it was initially expected, and after that the Bloomberg Dollar Spot Index fell by 2%. The fall became the most significant one over a period since 2009.
The published report, which provided the necessary data on consumer prices, gave reasons to expect this year’s multi-decade record price growth to start slowing down. This means the Fed might gain a possibility to reduce the pace of its aggressive monetary tightening. At the same time, traders are lowering their expectations of the level the rates might reach before the Federal Reserve stops hiking, the level which is alternatively called the terminal rate of the cycle.
Market participants are currently suggesting that a 50-basis-point rate increase is more likely to be delivered next month than a 75-basis-point one. If this is true, it might reduce the rate difference between the European Central Bank and the Bank of England.