- The US Dollar remains steady with a slight uptick following Wednesday’s US CPI release.
- February inflation cooled faster than expected, influencing market sentiment.
- The US Dollar Index hovers around 103.50 as traders assess the latest inflation data.
The US Dollar Index (DXY), which tracks the US Dollar (USD) against six major currencies, trades in positive territory for the first time this week as traders assess the US Consumer Price Index (CPI) data for February. Both monthly and yearly core and headline inflation figures came in below expectations, signaling a continued slowdown in inflation ahead of the tariffs imposed by US President Donald Trump in early March.
On the geopolitical front, China reaffirms its stance on retaliatory tariffs, while EU countermeasures are set for April 13, according to EU leader Ursula von der Leyen. Meanwhile, a US-brokered Ukraine-Russia ceasefire deal is under discussion, with Moscow yet to respond.
Daily Digest Market Movers: Softer CPI Fuels Rate-Cut Speculation
- The US CPI report for February confirms slowing inflation:
- Monthly headline inflation came in at 0.2%, below the 0.3% consensus and down from 0.5% in January.
- Core inflation eased to 0.2%, slightly softer than the 0.3% forecast and down from 0.4% previously.
- Yearly headline inflation fell to 2.8% (vs. 2.9% expected), while core CPI dropped to 3.1% (vs. 3.2% estimate and 3.3% prior).
- A softer inflation reading strengthens Federal Reserve (Fed) rate-cut expectations, with markets pricing in:
- A 97.0% chance of no rate change in the March 19 Fed meeting.
- A 37.6% probability of a rate cut in May and 81.7% in June (CME FedWatch Tool).
- US Treasury to auction a 10-year Note at 17:00 GMT.
- St. Louis Fed President Alberto Musalem is scheduled to speak at 17:35 GMT at the NABE Economic Policy Conference in Washington, D.C.
- Equities rally, with US and European stock indices gaining over 1% following the CPI release.
- US 10-year Treasury yield hovers around 4.31%, recovering from a five-month low of 4.10% on March 4.
US Dollar Index Technical Analysis: Rangebound Amid Fed Bets
The US Dollar Index (DXY) remains under potential selling pressure as recession fears persist. A weaker inflation reading reduces immediate concerns about an economic downturn but supports Fed rate-cut bets, increasing downside risks for the US Dollar.
- Key resistance: 104.00 – A break above this level could lead to 105.00, with the 200-day Simple Moving Average (SMA) at 105.03.
- Key support: 103.00 – A decline in US Treasury yields could push DXY toward 101.90 if markets further adjust long-term USD positions.
With Fed rate cuts becoming more likely, the US Dollar could face further downside in the near term.
