The US Dollar Index (DXY) continued its downward trajectory for the fourth consecutive session, reaching approximately 104.20 during Monday’s Asian trading hours. Despite a temporary boost from the improved Producer Price Index (PPI) in the United States, the US Dollar (USD) closed the session with losses, with market participants anticipating subdued movement following the President’s Day bank holiday.
The decline in the US Dollar was attributed to the volatility in US Treasury yields on Friday, concluding the day under pressure. Former Fed official James Bullard’s suggestion of potential interest rate cuts in the upcoming March meeting added to the downward pressure, as concerns about the impact of higher rates on economic activity were raised.
Market sentiment currently suggests that the US Federal Reserve may abstain from rate cuts in both March and May. The CME FedWatch Tool indicates a roughly 52% likelihood of a 25 basis points (bps) rate cut in June.
Despite the overall bearish sentiment, the US Producer Price Index (PPI) reported encouraging figures, showing an annual growth of 0.9%, surpassing the expected 0.6% and the prior 1.0%. The month-over-month improvement was 0.3%, contrasting with the previous decline of 0.1%. In January, the US Core Producer Price Index (YoY) rose by 2.0%, exceeding the anticipated 1.6% and the previous 1.7%.
However, the positive economic indicators were met with mixed results, as the month-on-month (MoM) data reported a 0.5% rise, falling short of the predicted 0.1% increase, despite an improvement from the previous 0.1% decline. Meanwhile, the preliminary Michigan Consumer Sentiment Index showed a modest improvement to 79.6 from the previous figure of 79.0, below the anticipated 80.0 figure.
