Will US inflation add pressure on the dollar index today?

Will US inflation add pressure on the dollar index today?

The dollar index displayed a rate that was slightly lower yesterday. The annual US producer price index did not surprise, but monthly prices rose more than expected. Jerome Powell added to the scenario given in the latest decision of the Federal Reserve (Fed) that interest rates can be kept higher for longer, but eventually there will be cuts and inflation will return to the target.

Federal Reserve Chairman Jerome Powell said that inflation is falling slower than expected, and the PPI data provided more justification to keep rates higher for longer. Powell added that it’s unlikely in his view that the central bank would have to raise further interest rates, even if the chances for rate cuts have become less. Additionally, Kansas City Fed President Jeffrey Schmid noted that inflation remains too high and the US central bank has more work to do. These hawkish comments might lift the US Dollar Index (USD) and weigh on the major pair in the near term.

The US Bureau of Labor Statistics reported the producer price index rose by 0.5% in April from March, up from a revised rise of 0.2% in March.

Core PPI, which excludes volatile items like food and energy, rose 0.4%, up from 0.2% in March and above the 0.2% consensus estimate.

Later today, April’s Consumer Price Index (CPI) data will likely impact the expectations on the easing cycle, which is seen starting in September.

The annual headline CPI inflation is expected to ease to 3.4% in April from 3.5% in the previous reading. The Core CPI inflation is projected to drop to 3.6% in April from 3.8% prior. If the forthcoming CPI data meets expectations, it could trigger the prospect of rate cuts, which could weight on dollar index.

Technical Outlook – Dollar Index

The dollar index continued trading lower since start of the month. It retreated from the peak of 106.490 and yesterday made a low 104.9580.

Formation of a long bearish candle stick is indicating for bearish momentum to continue. Adding to this, the index is trading below the SMA.

Hence, A break below 104.7550 mark will extend the fall towards 104.3025-103.8025. Alternatively, any rise towards 105.35-105.55 will add pressure in day’s to come

Also read-Economic Data: What Secrets Do US CPI and Sales Numbers Hold Regarding Future Fed Rates? Nifty Stages Comeback After Short-Term Pullback

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