Dollar Softens on PPI Miss
The US Dollar continues to pull back from highs ahead of today’s keenly awaited US inflation data. Yesterday, a weaker-than-forecast set of PPI readings saw the greenback coming under fresh selling pressure. The Dollar had been rising high on the back of last week’s strong jobs data. However, yesterday’s data has fuelled some uncertainty ahead of CPI today, suggesting risks for an undershoot.
US Inflation Due
On the numbers front, the market is looking for headline CPI to rise to 2.9% from 2.7% prior, year-over-year. If confirmed, or topped, this should see traders further pushing out their Fed rate cut expectations in coming months, leading to fresh buying in USD. However, if inflation comes in below forecasts today, this should see March rate cut chances creeping back up, putting downward pressure on the Dollar.
Hawkish BOJ Chatter
USD is also being weighed on midweek by a fresh rise in JPY linked to renewed hawkish BOJ expectations. Comments from BOJ governor Ueda have fuelled expectations of a forthcoming BOJ rate hike at the next meeting. Ueda said that the BOJ would hike rates again if current improvements in the economy continue. These comments come days after Ueda noted that the BOJ would be considering a hike at the upcoming meeting. If US inflation undershoots today, this could fuel a strong shift into JPY buying near-term, leading USD lower.
Technical Views
DXY
The rally in DXY has stalled for now with price reversing back under the 109.35 level. With momentum studies softening, a deeper correction is possible here. However, the broader bull bias remains while price holds within the bull channel or at least above the 107.25 level support.
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