The dollar edged higher against the euro on Friday after U.S. producer inflation data for November came in slightly hotter than expected, bolstering the case for continued interest rate hikes by the Federal Reserve even if at a slower pace. U.S.
producer prices (PPI) rose 0.3% last month, data showed, above the 0.2% forecast by economist polled by Reuters. While the PPI report showed the underlying trend in inflation was moderating, it heightened concerns among market participants that next week's consumer price inflation report, which comes out just before the December Fed interest rate decision, could also surprise on the upside. "It was a stronger read on prices... that will leave the market cautious on a similar outcome next week," said Ian Lyngen, head of U.S. rates strategy at BMO Capital Markets.
The U.S. central bank is in the midst of the fastest interest rate-hiking cycle since the 1980s as it tries to counter decades-high inflation, but Chair Jerome Powell said last month it could scale back the pace of rate hikes as soon as December.
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