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US Dollar Index moves above 109.00, upside potential seems limited due to dovish Fed

  • The US Dollar Index could struggle due to the increased likelihood of the Fed lowering interest rates twice this year.
  • US Retail Sales rose by 0.4% MoM in December, falling short of the market expectations of a 0.6% rise.
  • US Treasury yields are expected to see a weekly decline of over 3%.

The US Dollar Index (DXY), which tracks the US Dollar’s (USD) performance against six major currencies, halts its four-day losing streak, trading near 109.10 during the Asian hours on Friday. However, the Greenback encountered difficulties as weaker US Retail Sales and underlying inflation data bolstered market expectations that the Fed will reduce interest rates twice this year.

US Retail Sales rose by 0.4% MoM in December, reaching $729.2 billion. This reading was weaker than the market expectations of a 0.6% rise and lower than the previous reading of a 0.8% increase (revised from 0.7%).

US core Consumer Price Index (CPI), which excludes volatile food and energy prices, rose by 3.2% year-over-year (YoY) in December, slightly below both the previous month's 3.3% increase and market forecasts of 3.3%. Monthly, the core CPI grew by 0.2%, compared to a 0.3% rise in the prior month.

The increasing dovish sentiment surrounding the Fed led to a drop in US Treasury bond yields, with the 2-year and 10-year notes now at 4.23% and 4.60%, respectively. Both yields are set to experience a weekly decline of more than 3%.

Chicago Federal Reserve Bank President Austan Goolsbee stated on Thursday that he has grown increasingly confident over the past several months that the job market is stabilizing at a level resembling full employment, rather than deteriorating into something worse, according to Reuters.

(This story was corrected on January 17 at 07:45 GMT to say, in the first paragraph, "weaker US Retail Sales and underlying inflation data bolstered market expectations." not persistent inflation.)

US Dollar PRICE Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the New Zealand Dollar.

 USDEURGBPJPYCADAUDNZDCHF
USD 0.09%0.16%0.26%0.06%0.17%0.32%0.08%
EUR-0.09% 0.07%0.21%-0.03%0.07%0.24%-0.01%
GBP-0.16%-0.07% 0.11%-0.10%0.00%0.16%-0.08%
JPY-0.26%-0.21%-0.11% -0.20%-0.10%0.05%-0.20%
CAD-0.06%0.03%0.10%0.20% 0.10%0.26%-0.00%
AUD-0.17%-0.07%-0.01%0.10%-0.10% 0.16%-0.09%
NZD-0.32%-0.24%-0.16%-0.05%-0.26%-0.16% -0.25%
CHF-0.08%0.01%0.08%0.20%0.00%0.09%0.25% 

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).

Author

Akhtar Faruqui

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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