US Dollar Index: DXY Reaffirms 15-Month Low Below 100.00 As Markets Reevaluate Fed Bias

US Dollar Index (DXY) falls to its lowest level since April 2022, around 99.70 on Friday morning, as markets seek fresh indications that the greenback's recent carnage will continue. In spite of this, the most recent comments from a Federal Reserve (Fed) official have added to a cautious tone ahead of the mid-tier US data, which is expected to encourage the DXY bearish. On the other hand, the US Dollar Index is weighed down by apprehensions of a Fed policy reversal, primarily as a result of the week's weak inflation data.

Recently, Federal Reserve Governor Christopher Waller stated, "This year, the Fed will likely require two additional 25 basis point rate hikes." In remarks prepared for delivery before a meeting of The Money Marketeers of New York University and shared by Reuters, the policymaker ruled out concerns regarding the Fed's interest rate apogee and emphasised the need for two more declines in inflation.

In addition to Fed's Waller, a halt in US Treasury bond yields after resetting the two-week low also stimulates the DXY bears, even if they just reset the multimonth low. In spite of this, as of press time, the yields on 10-year and 2-year US Treasury bonds are up approximately 3.78% and 4.65%, respectively.

Fears of a Fed policy reversal after July's already-priced rate hike persist despite negative US inflation indicators, which exert downward pressure on the US Dollar Index. However, the US Producer Price Index (PPI) for June came in at 0.1% YoY, compared to 0.4% expected and 0.9% previously, while the PPI ex Food & Energy, also known as the Core PPI, decreased to 2.4% YoY from 2.8% previously and 2.5% market expectations. Earlier this week, the US Consumer Price Index (CPI) posted a 3.0% YoY figure for June, compared to 3.1% market expectations and 4.0% reported for May. The CPI excluding food and energy, also known as the Core CPI, slowed to 4.8% annually for the month in question, compared to analysts' predictions of 5.0% and previous readings of 5.3%.

Japan's Nikkei news spreads rumours that China will require more investment, which boosts sentiment and supports the US Dollar Index.

As a result of these plays, the S&P500 Futures fall intraday by 0.16% from the yearly high, while the commodities remain firmer but with cautious movements.

The preliminary readings of the Michigan Consumer Sentiment Index for the month of July and the Five-Year Consumer Inflation Expectations will be analysed to determine future directions. Should the final indications of US inflation be negative, the DXY could easily target the 99.40-35 support zone.