US Dollar unphased by softer than expected inflation reading for February

March 12, 2025

NEW YORK (March 12) The US Dollar Index (DXY), which tracks the performance of the US Dollar (USD) against six major currencies, trades broadly flat and stabilizes on Wednesday while traders digest the United States (US) Consumer Price Index (CPI) release for February. Both yearly and montly numbers for the core and headline inflation came in below expectations, which means that inflation was still slowing in February ahead of the tariffs US President Donald Trump imposed at the start of March. 

On the geopolitical front, China again vowed to retaliate on US tariffs. Meanwhile, Europe is set to issue countermeasures on April 13, European Union (EU) leader Ursula Von Der Leyen said this Wednesday. Overnight headlines emerged on the Ukraine-Russia war, where a ceasefire truce is on the table after Ukraine agreed to a brokered deal by the US. The ball is now in the court of Russia to support or refuse it. 

Daily digest market movers: CPI slowdown

  • The US Consumer Price Index (CPI) report for February has been released:
    • The monthly headline inflation came in at 0.2%, below the 0.3% consensus and further down from 0.5% in January. Core inflation eased to 0.2%, a touch softer than the expected 0.3% and from 0.4% previously.
    • The yearly headline reading came in at 2.8%, just below the 2.9% consensus and down from 3.0% in January. The core gauge softens to 3.1%, below the 3.2% estimate and down from 3.3% in the previous month. 
    • A much softer reading in inflation data should boost rate-cut bets for the Federal Reserve (Fed) and result in another drop in the US Dollar. 
  • Around 17:00 GMT, the US Treasury will auction a 10-year Note. 
  • At 17:35 GMT, St. Louis Fed President Alberto Musalem will speak at the NABE Economic Policy Conference in Washington, D.C.
  • Equities are seeing overall more than 1% gains with European and US equity indices rallying higher after the US CPI release. 
  • The CME Fedwatch Tool projects a 97.0% chance for no interest rate changes in the upcoming Fed meeting on March 19. The chances of a rate cut at the May 7 meeting stand at 37.6% and 81.7% at June’s meeting.
  • The US 10-year yield trades around 4.31%, off its near five-month low of 4.10% printed on March 4.

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