English
US Dollar Index Recovers From Weekly Low Amid Lackluster US Inflation And Hawkish Fed Wagers
The US Dollar Index is testing a two-day slump at the weekly low. Fed talks defend rate rise stance despite lower US inflation. Treasury rates re-establish a multi-day high in the wake of the US CPI on the back of positive Fed comments, boosting the DXY. US Retail Sales, second-tier data, is viewed with a fresh perspective.
The US Dollar Index (DXY) maintains a defensive stance at 103.30, following a rebound from a one-week low, as dollar bulls await additional signs to reverse a two-day downturn during early Wednesday trading.
US inflation statistics first failed to excite US Dollar bulls, causing the dollar's index against six major currencies to fall to its lowest level in a week the day before. The US Treasury bond yield and the DXY, however, were later boosted by the hawkish Federal Reserve (Fed) comments.
The US Consumer Price Index (CPI) surpassed market estimates with a 6.4% year-over-year (YoY) growth, but it was the slowest increase since 2021, falling below 6.5% previously. Importantly, the CPI excluding food and energy, also known as the Core CPI, increased by 5.6% year-over-year compared to market expectations of 5.5% and previous readings of 5.7%.
Following the statistics, the majority of Federal Reserve (Fed) policymakers were in support of additional rate hikes, despite the fact that the United States inflation failed to meet expectations for a "pleasant surprise." The same factor drove yields on US Treasury bonds and the US Dollar. However, Lorie Logan, president of the Dallas Fed, emphasized that they must be prepared to continue rate hikes for a longer period of time than originally anticipated. John Williams, president of the Federal Reserve Bank of New York, echoed this sentiment, stating that the job to contain excessive inflation is not yet complete. In addition, Patrick Harker, president of the Federal Reserve Bank of Philadelphia, said that they are not yet done (raising rates), but are likely close.
Consequently, US 10-year Treasury bond rates fluctuate around 3.75%, up three basis points (bps) after reaching a six-week high, while the two-year equivalent spiked to its highest level since early November 2022 by touching 4.60%. Similarly, Wall Street's day-end losses supported the DXY's bounce.
Traders of the US Dollar Index should pay close attention to Wednesday's US Retail Sales and Industrial Production data for January, as well as the NY Empire State Manufacturing Index for February, in order to confirm the Fed's hawkish tilt and maintain the recovery's momentum.
Bonus rebate to help investors grow in the trading world!
