- The US Dollar soars following hawkish comments from the Fed.
- Dallas Fed President Logan signals uncertainty over a potential December rate cut.
- The US Dollar Index climbs above 106.00, reaching a new six-month high.
The US Dollar (USD) is gaining momentum following comments from Federal Reserve Bank of Dallas President Lorie Logan. Logan stated that a December rate cut, which markets had largely priced in, may not be as certain as previously thought. This suggests the Fed could reconsider its path, possibly ending its rate-cut cycle early, especially if President-Elect Donald Trump's proposed policies spur inflation and push rates higher in the US.
This week’s key event on the US economic calendar is the release of the October Consumer Price Index (CPI) report. While the data came in broadly in line with expectations, the muted reaction in the Greenback reflects the narrow range of the numbers, leaving markets with little new information to react to.
Daily Digest: Market Movers – Logan Damps December Rate Cut Hopes
The Mortgage Bankers Association (MBA) kicked off Wednesday’s economic calendar at 12:00 GMT with its weekly Mortgage Applications report. Applications rose slightly by 0.5%, a modest rebound following last week's steep 10.8% decline.
The US Consumer Price Index (CPI) for October met expectations with no major surprises. Monthly headline inflation held steady at 0.2%, while the annual figure edged up to 2.6% from 2.4%. Core inflation also remained unchanged, rising 0.3% month-over-month, with the yearly rate staying steady at 3.3%.
In central bank news, five Federal Reserve members are set to speak on Thursday:
- Federal Reserve Bank of Minneapolis President Neel Kashkari will appear on Bloomberg TV at 13:30 GMT.
- Federal Reserve Bank of New York President John Williams will give welcome remarks at the Academy for Teachers Master Class at 14:30 GMT.
- Federal Reserve Bank of Dallas President Lorie Logan will deliver opening remarks at the ninth joint energy conference hosted by the Federal Reserve Banks of Dallas and Kansas City at 14:45 GMT.
- Federal Reserve Bank of St. Louis President Alberto Musalem will speak at the Economic Club of Memphis at 18:00 GMT, followed by a Q&A session on US economic outlook and monetary policy.
- Federal Reserve Bank of Kansas City President Jeffrey Schmid is expected to deliver a keynote speech at 18:30 GMT at the same energy conference.
Equity markets are turning negative after comments from Dallas Fed President Lorie Logan, who raised doubts about the certainty of a December rate cut. The CME FedWatch Tool now shows a 62.4% probability of a 25 basis point rate cut at the Fed's December 18 meeting, down from higher expectations last week. The chances of rates staying unchanged have risen to 37.6%.
Meanwhile, the US 10-year benchmark yield has climbed back to 4.42%, bouncing higher following Logan’s remarks.
US Dollar Index Technical Analysis: A Possible Overextension
The US Dollar Index (DXY) continues its upward momentum, further building on the gains from earlier this year. This rally is in line with the higher US yields seen since the summer. However, the move could be getting overstretched, raising the likelihood of a near-term correction driven by profit-taking.
Key resistance is now at 106.52, the April high, which could form a double top if tested. A break above this level would open the door to a fresh 2024 high, with 107.00 and 107.35 becoming the next significant targets.
On the downside, support is expected around the psychological 104.00 level, as well as the 200-day Simple Moving Average (SMA) at 103.88. Before that, there’s minimal support, though the high from October 30 at 104.63 could offer a brief pause.
