USD Gains Momentum on Fed’s Potential Pause in Rate Cuts
The US Dollar (USD) strengthens following comments from Dallas Fed President Lorie Logan, suggesting the Federal Reserve might reconsider the need for a December rate cut. Logan’s remarks reflect a potential pause in the rate-cut cycle amid expectations that President-elect Donald Trump’s economic policies could drive inflation higher.
Key Developments:
- Inflation Data: The US Consumer Price Index (CPI) for October was in line with expectations, with headline inflation rising to 2.6% year-over-year.
- Fed Commentary: Comments from multiple Fed officials today could further influence rate expectations. Currently, the CME FedWatch Tool shows a 62.4% chance of a 25 bps rate cut in December, down from prior odds, with a 37.6% chance for no cut.
- Market Reactions: Equity markets turn red, and the 10-year Treasury yield rises to 4.42% following Logan’s remarks, reflecting increased uncertainty around further Fed easing.
Technical Outlook: USD Index
The Dollar Index (DXY) continues its uptrend, testing resistance at 106.52. A break above this April high could push the DXY towards 107.00, with 107.35 as the next target. On the downside, support at 104.00 and the 200-day SMA at 103.88 should help limit declines.