US dollar retreats as US inflation disappoints
Philip McHugh January 16th 2025 - 2 minute read

Pound (GBP) firms on inflation relief
The pound (GBP) rallied during yesterday’s session as GBP investors welcomed a surprise slowdown in UK inflation last month.
The fall in inflation boosts bets the Bank of England (BoE) may cut interest rates next month, which in turn should help to lower UK government borrowing costs.
However, Sterling has already started to relinquish some of these gains this morning, after the UK’s latest GDP figures reported a smaller-than-expected rebound in growth in November.
Euro (EUR) slides as German economy contracts
The euro (EUR) trended broadly lower on Wednesday. Initial pressure on the single currency followed the release of Germany’s 2024 GDP data, which revealed the Eurozone’s largest economy shrank for the second year in a row.
These losses were then reinforced after European Central Bank (ECB) policymaker Francois Villeroy de Galhau said that it would make sense for interest rates to ‘reach 2% by the summer.’
Coming up, the ECB will publish the minutes from its December policy meeting later this morning. If these show there is still appetite for further rate cuts, the euro may extend its losses.
US dollar (USD) slides as US core inflation cools
The US dollar (USD) retreated on Wednesday in the wake of the latest US inflation print. While December’s CPI figures reported headline inflation accelerated from 2.7% to 2.9% as forecast, core inflation unexpectedly slowed to 3.2%.
This dragged on the US dollar amid suggestions that USD investors may have been a little hasty in pricing out a Federal Reserve interest rate cut this year.
Looking ahead, the US will publish its latest retail sales figures later today. If sales growth slowed in December, it may place additional pressure on the ‘greenback’.
Canadian dollar (CAD) falters despite rising oil prices
The Canadian dollar (CAD) stumbled yesterday, as the currency was undermined by its positive relationship with the US dollar.
While Canadian data is in short supply today, a continued uptick in oil prices may offer some support to the ‘loonie’.
Australian dollar (AUD) softens as unemployment rises
The Australian dollar (AUD) trended broadly lower overnight on Wednesday after data showed that Australian unemployment rose in December, following a drop in full-time roles.
New Zealand dollar (NZD) weakens in risk-off trade
The New Zealand dollar (NZD) was also subdued in overnight trade as a cautious market mood weakened the appeal of the risk-sensitive ‘kiwi’.
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Written by
Philip McHugh