- The dollar index and futures fell by 0.1% amid expectations of signals from US interest rates.
- January CPI data is expected to decline while remaining above the Fed's 2% target, and may weigh on continued interest rate hikes.
- Upcoming speeches by Fed officials, including Kashkari, Daly and Bostic.
The dollar index and its futures contracts witnessed a slight decline, as each fell by 0.1% in the Asian trading sessions. This movement reflects traders' expectations regarding important information that may affect the direction of US interest rates. There is a slight decline in inflation expected, with January CPI data due on Tuesday. Continued “sticky” price pressures, especially in the core CPI, suggest that inflation will remain well above the Fed's 2% annual target. This situation is likely to reinforce the Fed's determination to maintain high interest rates to address inflation.
The Fed's stance: an obstacle to early cuts
The financial community is eagerly awaiting the opinions of several prominent Federal Reserve officials scheduled to speak this week. Figures such as Neel Kashkari, Mary Daly and Ralph Bostic are expected to discuss the current economic landscape. The consensus among market participants is that these speeches are likely to emphasize a cautious approach to monetary policy. Therefore, this may dampen any early expectations of interest rate cuts. This position is crucial because it helps regulate market speculation and guides investors toward a more accurate understanding of future monetary policy adjustments.
The yuan falls by 0.1% in offshore trading
Anticipation of the direction of the Fed's policy has weighed on Asian currencies, with many of them seeing declines against the dollar. The Chinese yuan, Australian dollar, and South Korean won fell by 0.1%. The yen's position is particularly notable, as it is trading near its weakest level since late November at 149.23 to the dollar, making it the worst performer among Asian currencies in 2024. This trend highlights the significant influence of US monetary policy and inflation expectations on global currency markets.
