The US Dollar Index (DXY) is facing challenges as it extends its losing streak for the fifth consecutive session, trading around 102.60 during the Asian session on Thursday. The recent Consumer Price Index (CPI) data revealed a moderate increase in July’s annual US inflation rate, sparking debates on the Federal Reserve’s (Fed) rate cuts in September.
In July, the US headline Consumer Price Index (CPI) rose 2.9% year-over-year, slightly lower than the 3% increase in June and below market expectations. The Core CPI, excluding food and energy, climbed 3.2% year-over-year, aligning with market forecasts.
Investors are now speculating on the extent of the Fed’s rate cuts next month. While a 25 basis point reduction is favored by traders with a 60% probability, a 50 basis point cut remains a possibility, with a 36% chance according to CME FedWatch.
Despite the Dollar’s decline, it received support from improved Treasury yields, with 2-year and 10-year yields on US Treasury bonds at 3.95% and 3.83% respectively. Traders are eagerly awaiting US Initial Jobless Claims and Retail Sales data set to release on Thursday.
US President Joe Biden’s comments on Iran and Gaza cease-fire talks may have strengthened risk sentiment, potentially adding pressure on the US Dollar. New talks are scheduled for Thursday in Qatar, although Hamas has indicated they will not participate.
Analysis:
The US Dollar’s recent decline comes after mixed CPI data, raising expectations for a rate cut by the Federal Reserve in September. Investors are closely watching future economic data releases and geopolitical developments for further insights into the Dollar’s performance. Understanding these factors can help individuals make informed decisions about their investments and financial strategies.