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US Dollar Index drops below 104.00 amid China-inspired confidence, contradictory Fedspeak ahead of US inflation
The US Dollar Index accepts bids to reestablish intraday lows, extending Friday's reversal from a one-month peak. The liberalization of China's national borders and the PBOC's growth optimism support a risk-taking attitude. Fed officials struggle to defend their hawkish bias in light of recent contradictory US statistics. The US CPI will be key for policy hawks amid rumors of diminishing inflation concerns.
US Dollar Index (DXY) renews its intraday low near 103.75 as it extends the previous day’s U-turn from a three-week high during Monday’s Asian session. In doing so, the DXY bears cheer optimistic feeling as well as mixed fears on the upcoming move of the US Federal Reserve (Fed).
That said, the risk-positive stories from China, one of the world’s major commodities users, enhance the market’s buoyant sentiment as Beijing reopens national borders after a three-year halt. On the same line might be the early signs suggesting China’s heavy spending throughout the Christmas season, as well as comments from People’s Bank of China (PBOC) Official suggesting optimism surrounding China’s economy conditions.
On the other hand, gloomy prints of the US wage growth, ISM Services PMI and the Factory Orders dampened the Treasury bond yields, as well as the US Dollar Index (DXY) the previous day. However, the headline US Nonfarm Payrolls and Unemployment Rate reported strong statistics for December.
Raphael Bostic, president of the Federal Reserve Bank of Atlanta, highlighted risks of a US economic downturn in response to the mixed data, while Charles Evans, president of the Federal Reserve Bank of Chicago, advocated a 0.50% rate hike in December. Further, Kansas City Fed President Esther George emphasized inflation fears whereas Richmond Federal Reserve Bank President Thomas Barkin complimented the last two months of inflation data by terming them as “a move in the right direction,” but underlined fears from the higher median values.
Wall Street closed with a gain, as 10-year US Treasury yields fell 16 basis points (bps) to 3.56 percent, the lowest level in three weeks. At the time of publication, S&P 500 Futures have seen intraday gains of 0.20%.
Moving forward, Thursday's US Consumer Price Index (CPI) for December is highlighted by the mixed US data and a decline in US Treasury bond yields, as stronger inflation readings could shift attention to hawkish Fed wagers and cause the DXY's corrective bounce.
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