The US dollar stabilized at a five-month low as market participants await today’s Consumer Price Index (CPI) figures, which may provide crucial indications regarding the Federal Reserve’s upcoming decisions.
Growing recession fears, fueled by softer labor market data and trade policy uncertainties, have increased bets on rate cuts.
are anticipating a rate cut in June, but still see a 40% chance of an earlier move in May, adding pressure on the greenback.
However, if today’s core and headline numbers show resilient inflation, traders may delay expectations for rate cuts, providing a temporary boost for the US currency.
Meanwhile, US treasury yields declined, with the 10-year note moving within a narrow range above 4.2%. A stronger-than-expected CPI data is likely to support yields, reinforcing expectations of a more hawkish Fed stance. Conversely, softer inflation numbers are expected to exert pressure on yields.
On the geopolitical front, progress on a potential ceasefire between Ukraine and Russia, following yesterday’s meeting between US and Ukrainian officials, could bolster risk appetite. As a result, the demand for safe-haven currencies might decline, adding to the dollar’s recent weakness.
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