US Dollar advances fueled by hawkish Fed's Waller remarks
NEW YORK (January 16) The US Dollar (USD) started the trading session by surging to the 103.40 mark, quickly being pulled back by the resistance of the 100-day SMA. This swift rebound was primarily due to US traders returning from their holiday, further catalyzed by a progressive rise in yields. Federal Reserve's (Fed) Christopher Waller's hawkish comments where he noted that achieving a 2% inflation rate won't be as easy as expected and intends only three rate cuts in 2024.
The markets are anticipating that the Fed’s easing cycle will begin in March, followed by another rate cut in May, which may limit any upside for the US Dollar. Despite higher CPI numbers, the market remains stubborn and expects the Fed to initiate its easing cycle sooner rather than later, and the soft PPI readings gave markets a reason to bet on a less aggressive approach.
Daily digest market movers: US Dollar finds strength as US traders return, bond yields rise
- No significant reports were released during the session.
- US bond yields are edging higher, with the 2-year yield at 4.20%, the 5-year yield at 3.90% and the 10-year yield at around 4%.
- Forward-looking markets anticipate that for the upcoming January meeting, the CME FedWatch Tool points toward no hike, with low probabilities of a rate cut. Additionally, markets are pricing higher odds of rate cuts in March and May 2024.
- This week, the US will release Retail Sales figures from December and the Fed’s Beige Book, which may have an impact on those expectations.
FXStreet
