US Dollar clears Monday's losses benefited by a negative market enviroment

NEW YORK (January 9) The US Dollar (USD) Index trades on an upward trajectory on Tuesday, touching the 102.50 mark and largely buoyed by the prevailing negative market sentiment that is bolstering the demand for the Greenback. Furthermore, investors are keeping a keen eye on the Consumer Price Index (CPI) outcome on Thursday as a potential determinant of the pair's movement for the next sessions.

For now, markets are betting on five rate cuts in 2024, largely dismissing the Federal Reserve (Fed) forecast of only 75 bps of easing. Strong labor market data from the US economy was largely offset by a weak US ISM PMI print, so December’s CPI reading will play a big role in shaping expectations of the central bank’s easing calendar.

Daily digest market movers: US dollar rises on  negative market sentiment, eyes on CPI

• The negative market mood fuels an increase in the demand for the USD as investors turn cautious ahead of CPI figures.
• The December Consumer Price Index is projected to come in at 3.2% YoY, above the previous 3.1%. The core annual reading, however, is expected at 3.8%, easing from 4% in November.
• US bond yields exhibit a mixed behavior, with the 2-year yield at 4.38%, the 5-year yield nearly at 4%, and the 10-year yield hovering a little above 4%.
• The CME FedWatch Tool suggests that the January meeting is expected to maintain rates with low chances of a cut. Markets are now pricing in higher odds of future rate cuts come March and May 2024.

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