The dollar continued climbing early on Wednesday, with the dollar index reaching the 100.50 level, but dropping sharply later in the day, closing at 99.8. Yields also fell across the US treasury curve, with the US 10-year treasury note falling below 2.7% on Wednesday.To get more news about topfx reviews, you can visit wikifx.com official website.
US Producer Price data released on Wednesday jumped by 11.2% from last year’s data, marking the biggest increase on record in over a decade. The PPI data are leading indicators of consumer inflation and were higher than expected due to the rise in oil prices, suggesting that US inflation would remain at high levels for some time.
Soaring inflation rates in the US have increased expectations of a high rise in the Fed’s benchmark interest rate, buoying the dollar. CPI data released on Tuesday showed headline inflation in the US rose to 8.5%, its highest rate since 1981, while core CPI (excluding food and energy) came below expectations, at 6.5%.
Over the past couple of weeks, Fed rhetoric has been one of the primary drivers of USD price, as the Fed signals a faster pace of policy tightening in the US. Markets are beginning to price in a steep rate hike of 50 base points at the Fed’s next policy meeting in May. Markets have been pricing in a total of over 225 base points of additional interest rate hikes this year, boosting the dollar.
This week, Fed rhetoric continued raising expectations of a steep rate hike, with FOMC member Evans commenting on Monday that an interest rate rise of 50 base points in May seems highly likely. On Tuesday, FOMC Member Brainard delivered a speech about the economy at an online event hosted by the Wall Street Journal. Brainard emphasized in her speech the importance of bringing down inflation in the US through rate hikes and balance sheet trimming. Brainard was formerly considered one of the more dovish FOMC members and her recent hawkish tones carry extra weight, further boosting the dollar.
FOMC minutes released last week showed that several Fed officials were in favor of a rate hike of 50 base points last month, increasing the chances of a 50 bp increase in the Fed’s benchmark interest rate in May. FOMC minutes also signaled that the US Central Bank would reduce its bond holdings by as much as $95 billion per month.
Reports of escalating violence against Ukraine and increased sanctions on Russia have also turned investors’ interest towards safe-haven assets. On Wednesday, hopes for a resolution of the crisis between Russia and Ukraine were diminished, as Russian President Vladimir Putin announced that diplomatic talks with Ukraine are at a dead end. The Biden administration announced new sanctions last week, targeting Russia’s largest financial institutions to increase economic pressure on Russia.
Several important financial indicators are scheduled to be released on Thursday for the dollar, including Monthly Core Retail Sales and Retail Sales, Unemployment Claims, and Preliminary UoM Consumer Sentiment. In addition, FOMC Member Mester is due to deliver a speech on Thursday, which may cause some volatility for the dollar, as investors pay special attention to FOMC member statements to gain insight into the Fed’s direction ahead of the next policy meeting in May.
