US Dollar Index drops to near 104.20 after Ex-Fed Bullard suggests a rate cut in March

The US Dollar Index (DXY) continues its downward trend for the fourth consecutive session, slipping to around 104.20 during the Asian trading hours on Monday. However, the improved Producer Price Index (PPI) from the United States bolstered the US Dollar (USD), yet closed the session with losses. The market expects minimal movement in the Greenback following the President's Day bank holiday.

The US Dollar (USD) faced downward pressure as US Treasury yields saw a volatile session on Friday, ultimately ending the day under pressure. This movement could be attributed to former Fed official James Bullard's suggestion that the Fed should contemplate lowering interest rates in the March meeting to prevent hindering economic activity due to higher rates.

Market sentiment leans towards the idea that the US Federal Reserve will refrain from rate cuts in March and May. According to the CME FedWatch Tool, there is approximately a 52% likelihood of a 25 basis points (bps) rate cut in June.

The US Producer Price Index (PPI) showed an annual growth of 0.9%, exceeding the anticipated 0.6% and 1.0% prior. Additionally, the month-over-month improvement was 0.3%, against the previous decline of 0.1%. In January, the US Core Producer Price Index (YoY) rose by 2.0%, surpassing the expected 1.6% and the previous 1.7%.

Meanwhile, the month-on-month (MoM) data reported a 0.5% rise, against the predicted 0.1% rise from the prior decline of 0.1%. However, the preliminary Michigan Consumer Sentiment Index improved to 79.6 from the previous figure of 79.0, falling short of the anticipated 80.0 figure.