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US Dollar
Source: Newsmaker.id
The US dollar weakened in trading on Thursday (October 15), retreating from an 18-month high reached in the previous session. The US Dollar Index (DXY) currently stands at approximately 102.11, down about 0.43% during European trading hours. This decline follows a sharp drop in US Treasury yields and cautious remarks from several Federal Reserve officials, which dampened expectations for an interest rate hike in October.
The dollar’s decline provided room for other major currencies to strengthen. The euro rose by approximately 0.5% to US$1.1216, while the pound sterling gained 0.5% to reach US$1.3253. The pound also found support from data showing that the UK economy grew by 0.1% in August—defying expectations of a contraction.
In the bond market, the yield on the 10-year US Treasury note fell to around 5.09%, while the 30-year yield settled near 5.43%. This decline in yields served as a primary factor weighing on the dollar, even though earlier US Consumer Price Index (CPI) data had indicated higher-than-expected inflation. The situation reflects a tug-of-war between expectations regarding Federal Reserve policy and demand for safe-haven assets.
Expectations for a Fed rate hike in October had surged following the release of the CPI data, but they subsequently cooled after Fed Vice Chair Michelle Bowman and San Francisco Fed President Mary Daly suggested that the central bank could afford to wait for further data before taking its next step. The market now anticipates that additional economic data will be necessary to determine the future direction of policy.
Investors are now turning their attention to the US Producer Price Index (PPI) and retail sales data, both due for release today. The PPI will be significant as it offers insight into cost pressures at the producer level; should the data come in "hot," the dollar could face renewed upward pressure as interest rate expectations potentially climb once again. Conversely, lower data readings could exacerbate the dollar's weakness and fuel a recovery in other major currencies.
The dollar's movement will also be influenced by speeches from several Federal Reserve officials, including Kevin Warsh, on Friday. With the DXY (US Dollar Index) still hovering near an 18-month high—despite a recent correction—the market is currently in a "wait-and-see" mode, looking for new catalysts to determine whether this weakness is merely temporary or the beginning of a deeper correction.
Newsmaker Analysis: The US dollar is currently undergoing a correction following a strong rally to an 18-month high, with declining Treasury yields serving as the primary factor weighing on the DXY. Although US CPI remains elevated, cautious remarks from Fed officials have led the market to scale back expectations for an interest rate hike in October. However, this weakness cannot yet be considered a trend reversal, as upcoming US PPI and retail sales data have the potential to shift market expectations once again. Should these figures come in strong, the dollar could regain momentum; conversely, weaker data would likely intensify pressure on the DXY, creating room for the euro, the pound, and commodity-linked assets to strengthen.
Source: Newsmaker.id