Investors eye Thursday’s CPI data from the last month of 2023

Highlights:

• The DXY falls towards its 20-day SMA as the index falls towards 102.15.
• The Greenback is weighed down by lower US Treasury yields.
• The USD didn’t react to comments from Atlanta Fed’s Raphael Bostic, who signaled only two rate cuts in 2024.

The US Dollar is currently trading at 102.15, down from its previous close of 102.33. It is struggling to maintain its gains from last week as bulls have difficulty sustaining their momentum.

The calendar for Monday has nothing noteworthy to offer. The focus of attention will be on the December CPI figures, which will be released on Wednesday.

At its last meeting in 2023, the Fed maintained its dovish stance and predicted no rate hikes in 2024. It also noted that inflation would moderate.

Based on the current market expectations, a March rate reduction is probable, as well as another in May, mainly due to the December CPI report.

The Fed’s dovish stance and the anticipation of more rate cuts have contributed to a weakening of the US dollar.

The US dollar is struggling to hold on to last week’s gains, as investors await key inflation data.

The core measure is expected to be 3.8% year-on-year. US Treasury yields dropped, with the 5-year yield at 3.94%, the 2-year at 4.32%, and the 10-year at 3.98%. This pressured the USD.

The CME FedWatch Tool indicated that the expectations for the Fed’s easing actions started to move last week.

The five-year outlook for the Fed’s rate reductions has changed to five from six. With investors pricing in a hold for the January meeting, they’re expecting more rate cuts in March and May.