Dollar strengthens as markets reassess the Fed outlook

Important news this week

• Thu, 12th, 08:00 CET UK Gross Domestic Product.
• Fri, 13th, 14:30 CET US Producer Price Index.

Dollar strengthens as markets reassess the Fed outlook

The US dollar is gaining ground following yesterday's positive CPI report, which has reinforced expectations that the Federal Reserve may keep interest rates higher for longer. US Treasury yields are moving higher again, supporting the greenback. However, the Dollar Index is approaching technical resistance around 102.30, making this an important level to watch. A rejection could limit further dollar gains, while a decisive break higher would strengthen the bullish outlook.

Market talk

Equity markets are recovering, with stocks moving higher despite the renewed strength in the dollar and rising bond yields. The improved inflation picture appears to have reassured investors, although the market's interpretation of the Fed's next steps remains important. If yields continue to rise, technology and other growth stocks could face renewed valuation pressure.

Precious metals are struggling after turning lower at technical resistance. Gold is particularly weak around its 50-day moving average near $4,150 on the daily chart. A sustained move below this level could open the door to further losses. Silver is holding up better, potentially benefiting from the improved performance in equities and renewed industrial-demand optimism. However, the broader precious metals outlook remains vulnerable to higher yields and a stronger dollar.
Cryptocurrencies continue to underperform across the board. Unlike equities, they are showing little sign of benefiting from the improved market mood. Persistent selling pressure suggests that investors remain cautious towards digital assets, with Bitcoin and the wider market still struggling to establish a sustainable recovery.
The Japanese yen remains relatively weak, although this could create interesting technical opportunities in cross pairs such as GBPJPY and EURJPY. If the yen starts to recover, both pairs could offer room for a downside correction. For now, the broader interest-rate differential continues to weigh on the Japanese currency.

Oil is moving largely sideways, but its price action remains surprisingly resilient despite the stronger US dollar. The market appears to be leaning slightly higher, suggesting that underlying supply concerns or expectations of improved demand may still be providing support. A sustained move higher would need to overcome the current lack of clear momentum.

Overall, markets are balancing stronger US yields and dollar momentum against recovering equities. The next key signals will come from the Dollar Index around 102.30, gold's reaction at its 50-day moving average and whether the current equity recovery can continue without broader participation from cryptocurrencies.

Tendencies in the markets

• Equities sideways, USD at resistance, crypto weak, oil sideways, metals sideways, JPY mixed.