TOKYO- The US dollar held below a 6-1/2-month peak against major peers and bitcoin edged further off record highs on Wednesday as markets hit pause on so-called Trump trades ahead of key US inflation data later in the day.
The dollar is reaping the benefits of Republican Donald Trump’s victory in the US presidential election last week, sitting not far from Tuesday’s high of 106.17, its strongest since May 1.
Investors are pricing in policies of lower taxes and trade tariffs under the incoming administration that are seen as inflationary.
Meanwhile, Republicans inched closer to gaining full control of Congress, which would give the president-elect power to advance his agenda.
The Trump trade has also pushed up US Treasury yields as markets wager the Federal Reserve may temper the extent of its future rate cuts US/.
But momentum slowed on Wednesday as markets awaited a fresh read on US inflation, with the October Consumer Price Index (CPI) report to be released later in the day.
“Focus is likely to shift back to inflation and Fed policy in the latter part of the week, but whether that brings an unwinding of Trump trades remains to be seen,” said Charu Chanana, chief investment strategist at Saxo.
With investors already viewing Trump policies as inflationary, the market could be “more sensitive” if CPI comes in hotter-than-expected, she added.
The core gauge is expected to rise 0.3 percent in October.
Fed Chair Jerome Powell is scheduled to speak this week, ahead of US Producer Price Index (PPI) data on Thursday and retail sales on Friday.
Markets currently have about a 60 percent chance of another quarter basis point cut from the Fed priced in for December, down from around 84 percent a month ago, according to CME Group’s FedWatch Tool.
