Dollar Dance: Why Your Currency Might Do a Little Shimmy Around CPI
Yesterday, the Dollar Index (DXY) dipped a smidge, settling at 102.24 points. Traders are holding their breaths before the big U.S. inflation release, keeping the market as quiet as a library on a Sunday.
All Eyes on the CPI (December)
Today’s headline is the U.S. Consumer Price Index (CPI). If the numbers are right, the Fed’s playground of rate cuts could get a major makeover.
- 5 cuts predicted for 2024 – that’s a whole lot more easing than the Fed’s own 75‑basis‑point plan.
- Labor market stays strong, which squashes the hype that inflation might swoop down.
- ISM (Purchasing Managers’ Index) is weak, but the CPI might hold the swing.
What the Data Might Say
Expect a 3.2% yearly rise in the December CPI – a touch higher than the 3.1% seen in November. Core inflation (excluding food & energy) is likely to trim down to 3.8% from 4.0%. Monthly CPI will tick up by 0.2%, Core CPI by 0.3%.
Bottom line: Core inflation dips, but monthly inflation does a small jump, giving the dollar a little lift in the short‑term.
Where’s the Dollar Heading?
With no dramatic drop in energy prices, overall inflation pressures stay stubborn – especially in the goods segment. Housing appears steady, another supporting flag for the dollar.
Fed officials keep a data‑focused stance, so this CPI release could be the cue that determines when and how fast the Fed trims rates, potentially shaking up the DXY.
Quick Takeaways
- DXY straddles around 102.24.
- Expect another modest CPI surge.
- Core inflation cools, but monthly spikes keep the dollar buoyant.
- Markets are watching; future rate cuts hinge on this report.
Stay tuned – whether you’re watching markets or just curious, the CPI could set the dollar on a new, slightly wobbling rhythm.
