The US dollar tumbled on Thursday against rival currencies as slowing US consumer price inflation dimmed expectations of more aggressive Federal Reserve rate hikes.
In early afternoon deals, the greenback sank sharply versus the pound, euro and yen, as official data showed US inflation eased to an annual rate of 7.7 per cent in October.
The pound jumped 1.9 per cent to $1.1574 and the euro rallied 0.8 per cent to $1.0092.
The consumer price index (CPI), a key measure of inflation, rose 7.7 per cent from October 2021, easing from September's pace but still underscoring the heightened cost of living that have squeezed many households, the Labour Department reported.
While the annual inflation rate was the lowest since January and down from a harsh 9.1 per cent in June – the highest in 40 years – latest figures are unlikely to bring quick reprieve from the Federal Reserve's ongoing interest rate hikes to cool the economy.
The Russia war in Ukraine has sent food a fuel prices soaring and the energy index surged 17.6 per cent over the past 12 months, according to the data. Excluding volatile food and energy prices, "core" CPI rose 6.3 per cent in October from a year ago, slightly below the rate in September.
As residents reel from soaring costs, the US central bank has embarked on an aggressive campaign to lower demand and bring prices down, raising the benchmark lending rate six times this year, including four consecutive giant rate hikes, despite fears it could trigger a recession.
Prices rose 0.4 per cent in October, the same as in September, while core slowed to 0.3 per cent, half the pace of the prior month.
"Inflation has finally started to drop like a rock in the US and this is the best news that anyone can expect," said AvaTrade analyst Naeem Aslam. "The Fed will still continue to increase the interest rate but there is no need to be aggressive about this – which means that the pace of interest rate hike will slow down now."
The Fed will still continue to increase the interest rate but there is no need to be aggressive about this – which means that the pace of interest rate hike will slow down now- AvaTrade analyst Naeem Aslam
The data was published one week after the US central bank unveiled a fourth straight 0.75-percentage-point increase as expected – the sixth hike this year to cool rampant prices.
The Fed however also warned last week that rates would go higher than previously expected in its fight against decades-high inflation.
US consumer prices cooled in October but remained at decades-high levels, according to government data released Thursday, keeping the pressure on President Joe Biden's administration as Democrats struggle to retain control of Congress.
The closely-watched report showed more evidence of rising costs in a year when surging inflation was at the top of voter concerns as Americans headed to the polls in this week's midterm elections.