US inflation data surpassed forecasts, which experts said could support the US dollar's prospects going forward.

The inflation rate in the United States stretched again at the end of 2023. This fact prompted market participants to doubt the Fed's interest rate cut expectations, so the greenback strengthened against other major currencies. The US Dollar Index (DXY) also climbed about 0.3% to the 102.70s in the New York session on Thursday (11/January).

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The United States Consumer Price Index (CPI) posted a rise of 0.3% (month-over-month) in December 2023. The headline CPI figure on an annualized basis increased from 3.1% to 3.4%, or higher than the consensus estimate of 3.2%. Core CPI slowed slightly, but the figure also exceeded expectations.

The US Bureau of Labor Statistics (BLS) revealed that the price increase rose mainly due to the continued rise in residential rental costs. In addition, price growth in the energy and food groups remained quite rapid.

Experts think this US inflation data could support the US dollar's future prospects. Especially if rising inflation encourages the Fed to keep interest rates high and postpone its planned cuts this year.

"We believe that there's still not enough evidence for the central bank to start cutting rates," says Nigel Green, CEO of deVere Group. "With inflation remaining sticky, we expect rates will be higher for longer. We don't see a policy pivot in sight."

"You ain't getting a March rate cut. It is the kind of print that shouts the Fed does not need to rush to cut this quarter," says Neil Wilson, Chief Market Analyst at Finalto.

The US Dollar rate rallied in all major pairs. USD/JPY hit a one-month high, while AUD/USD fell to a one-month low. EUR/USD again tumbled from the 1.1000 threshold to the 1.0950 range. Meanwhile, GBP/USD weakened and limited itself to the range formed since the beginning of the week.