US Dollar holds its ground on quiet Friday
- The US Dollar extends its winning streak on Friday, with the DXY Index trading above 107.00 for the first time in more than two weeks.
- Signs of lingering inflation pressure in the US gives the USD traction.
- There weren’t any major economic data highlights in Friday’s session.
The US Dollar Index (DXY), which measures the value of the USD against a basket of currencies, trades neutral on Friday with some minor gains in the US trading session. The Greenback is under some pressure from profit-taking after steep rallies against many major G20 currencies earlier this week. This retracement follows the release of new Chinese economic data and additional details on the stimulus package that the Chinese government is rolling out.
In addition, the US Dollar seems to get some traction due to rising US Treasury yields, which seem to be offsetting the fact that markets are practically pricing in a cut in next week's Fed decision.
Daily digest market movers: Hot November PPI and Chinese stimulus drive market sentiment on quiet Friday
- November PPI ran hot, with a headline increase of 3.0% YoY, surpassing the expected 2.6%. The October figure was revised to 2.6% (previously 2.4%).
- Core PPI (excluding food and energy) surged by 3.4% YoY, exceeding analysts' forecast of 3.2% and revising October’s figure to 3.4% (previously 3.1%).
- PPI Services (excluding trade, transportation and warehousing) remained elevated at 4.6% YoY, suggesting sticky underlying inflation.
- Some analysts are downplaying the data due to a 56% jump in egg prices, but the core PPI still accelerated to the highest since February 2023, pointing to broad-based inflationary pressure.
- Despite the hot inflation data, markets have fully priced in a 25 bps Fed rate cut for next week, with many analysts forecasting a hawkish cut that sets up a pause in January.
DXY technical outlook: Indicators show resilience, but upside limited
The US Dollar Index continues to trade above the 107.00 level, maintaining its recovery from recent declines. On Friday, the DXY managed to stay above key levels despite mixed sentiment and speculation around the Fed's next move.
RSI and MACD indicators suggest that the DXY has regained some ground, but it may face resistance near the 107.00-107.50 range.
If the index breaks above this area, it could retest the 108.00 level, but momentum appears to be slowing down, potentially limiting further upside in the short term.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from the Bank for International Settlements. Following the Second World War, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold until the Bretton Woods Agreement in 1971, when the Gold Standard went away.