The dollar hovered close to one-year highs buoyed by a modest rise in inflation and a cautious stance from the Fed, as inflation rose slightly to 2.6 percent in October investors are now closely monitoring Fed officials’ statements.
The presidents of the Dallas and St Louis Fed expressed optimism that inflation will continue to gradually return to the 2% target.
However, Logan noted that, while rate cuts may be needed to sustain economic growth, the Fed should proceed with caution. This suggests that any easing of monetary policy could occur gradually, potentially limiting any immediate downward pressure on the dollar.
Adding to the dollar’s momentum are the concerns surrounding the incoming Trump administration. With Republican control of Congress, policies aimed at boosting inflation, including higher trade tariffs, are more likely, which may delay the Fed’s rate-cutting cycle.
All eyes are now on the upcoming U.S. economic data, including producer inflation and retail sales, both of which are key to the Federal Reserve’s assessment of the economy. Additionally, Fed Chair Jerome Powell’s speech today is expected to clarify the Fed’s stance, which could shape dollar sentiment in the near term. As a result, treasury yields are rising across all maturities, increasing the dollar’s appeal.
