Minimal movements and tending to be consolidative were observed in all major currency pairs, so the US dollar index was also relatively stable.
US dollar index (DXY) delays rally around 95.60s in Asian trading today (9/Feb). Minimal movements and tend to be consolidative observed in all major currency pairs, may be related to the lack of catalysts at the beginning of this week and the wait before the publication of US inflation data tomorrow.
Yesterday's 10Y US Treasury bond yield peaked to around 1.97%, its highest level since November 2019. However, the increase in yields was not strong enough to boost the USD rally again. The US dollar's bullish trend may still continue, but a number of factors put the brakes on it at the moment.
ECB President Christine Lagarde delivered somewhat hawkish rhetoric at last week's policy meeting. Although he has dismissed speculation surrounding the ECB's rate hike earlier this week, some market participants feel the need to reconsider the EUR/USD rate projections.
"(The dollar index) is in a holding pattern while markets weigh the prospect of a sudden Fed policy tightening versus the ECB's hawkish reversal," Westpac analysts wrote in a note to clients.
Westpac sees a more hawkish ECB limiting the USD rally in the near term, but the outlook for the USD medium term bullish trend remains firm. They also considered the decline in the US dollar index to open opportunities for "buy on dips" in the area below the 95 level.
Traders and investors are now waiting for the release of US inflation data (Consumer Price Index) tomorrow evening, especially since the inflation rate is the main consideration underlying the prospect of the Fed's interest rate hike. This provisional consensus estimates that the inflation rate in January 2022 will grow 7.3 percent (Year-on-Year), or higher than the 7.0 percent increase in December 2021.
The inflation forecast is in line with the recent comments of a Fed official. San Francisco Federal Reserve President Mary Daly said yesterday that the US inflation rate may rise even higher before moderating.
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