WASHINGTON (dpa-AFX) - The U.S. dollar gained against its major counterparts on Tuesday after data showing a bigger than expected increase in U.S. consumer price inflation dashed hopes a rate cut by the Federal Reserve in May.
The Labor Department said its consumer price index rose by 0.3% in January after inching up by 0.2% in December. Economists had expected consumer prices to edge up by 0.2%.
While the report also showed the annual rate of consumer price growth slowed to 3.1% in January from 3.4% in December, economists had expected the pace of growth to slow to 2.9%.
Excluding food and energy prices, core consumer prices climbed by 0.4% in January after rising by 0.3% in December. Core prices were expected to increase by 0.3%.
With Federal Reserve officials repeatedly saying they need more 'confidence' inflation is slowing before lowering interest rates, the data has further reduced optimism about a near-term rate cut.
CME Group's FedWatch Tool is currently indicating just an 8.5% chance of a quarter point rate cut in March, while the chances of a quarter point rate cut in early May have fallen to 35.3%.
The dollar index climbed to 104.96, gaining about 0.75%.
Against the Euro, the dollar firmed to 1.0712 from 1.0773. The dollar has strengthened to 1.2590 against Pound Sterling, gaining from 1.2627.
Against the Japanese currency, the dollar is up sharply, fetching 150.81 yen a unit. The Aussie is down against the dollar, weakening to US$ 0.6453. The dollar is stronger against Swiss franc, firming to CHF 0.8872, gaining more than 1.3%. Against the Loonie, the dollar firmed to C$ 1.3570 from C$ 1.3451.
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