US Dollar Index prints mild weekly gains around 95.50 on strong yields, focus on inflation
|- DXY struggles for clear direction, pares latest losses amid market’s CPI-linked anxiety.
- White House hints at strong inflation figures but Economic Adviser Deese sees receding figures afterward, Fedspeak favors March rate hikes.
- US Jobless Claims, Sino-American tussles and Russian headlines may also entertain traders.
- Markets have high hopes from US CPI, which in turn pushes traders to remain cautious.
US Dollar Index (DXY) kick-starts the key day with a positive footing around 95.60 amid Thursday’s Asian session.
In doing so, the greenback gauge tracks firmer US Treasury yields amid the market’s anxiety ahead of the US Consumer Price Index (CPI) data, as well as cheer risks emanating from the US-China and Russia-Ukraine issues. Also contributing to the inflation fears are the latest comments from the White House and the Fed speakers.
US 10-year Treasury yields pause the previous day’s pullback from the highest levels since July 2019, up one basis point (bp) near 1.93% by the press time. The bond bears have recently dominated markets as inflation fears push the Fed towards a stark rate lift in March.
That said, the White House (WH) conveyed expectations of a higher YoY inflation figure while also saying, “Its irrelevant month on month number will continue trending lower the rest of the year.” Following that, WH Economic Adviser Brian Deese said that he sees reason to think that factors boosting inflation will moderate over time.
Moving on, Cleveland Fed President Loretta Mester supported the March rate hike while Atlanta Federal Reserve President Raphael Bostic told CNBC on Wednesday he is hopeful that they will start to see a decline in inflation. Fed’s Bostic also said, "Leaning toward the need for a fourth interest rate increase in 2022."
Amid these plays, S&P 500 Futures remain indecisive despite Wall Street’s upbeat performance on tech-rally and strong earnings whereas Asia-Pacific stocks also pare day-start gains.
Moving on, higher hopes from the US CPI for January, expected 7.3% YoY versus 7.0% prior, which in turn could give rise to the DXY’s further advances on matching the forecasts, due to the hopes of a 0.50% rate hike by the Fed in March. However, any disappointment won’t be taken lightly.
Read: US Consumer Price Index January Preview: Is this inflation different?
Technical analysis
Although the 100-DMA defends DXY bulls around 95.30, the upside momentum needs validation from the 96.00 threshold.
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