During today's Asian trading, the US dollar fell slightly against major currencies, but remains close to the 26-month high reached yesterday, while market participants are cautious ahead of the publication of US inflation data, which may affect the trajectory of the Fed's monetary policy.
The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.07% to 109.53. Yesterday, the index added 0.28%. As for the data, the producer price index for December will be released later today, and the consumer price index for December will be presented tomorrow. Experts said that any upside surprise could threaten to close the door on easing together. A significant increase in energy and food prices at the end of 2024 supports the forecast for a 0.3% monthly increase in the consumer price index in December. If implemented, the annual inflation rate will reach 2.8%. Excluding food and energy, the core CPI is likely to show a relatively moderate monthly gain of 0.2%. Slower growth in vehicle prices and lower hotel prices should help contain core inflation. According to forecasts, on an annualized basis, the core CPI remained stable in December, at 3.3%. Although both general and core inflation have decreased compared to December 2023, the CPI has mostly shown sideways dynamics since the summer. The lack of additional progress has forced the Federal Reserve to refocus on price stability within its mandate. Traders are pricing in 29 basis points of easing this year, less than the 50 basis points the Fed projected in December. According to the CME FedWatch Tool, markets see a 2.7% probability of a 0.25% rate cut in January (compared to 6.4% a week ago), while the probability of an additional rate cut in March is 21.6%. In addition, the market's focus now appears to be shifting towards the possibility that U.S. tariffs may be raised gradually.