US Dollar Index shows mild weekly gains of 95.50 on strong yields. Focus on inflation

DXY fails to find clear direction amid market's CPI-linked anxiousness.

US Dollar Index shows mild weekly gains of 95.50 on strong yields. Focus on inflation
  • The White House suggests strong inflation figures, but Economic Adviser Deese sees declining figures. Fedspeak favors March rate increases.

  • US Jobless Claims. The Sino-American tussles, and the Russian headlines might also be of interest to traders.

  • The US CPI is expected to be a positive sign for the markets. This encourages traders to remain cautious.

US Dollar Index (DXY), kicks off the key day on a positive note around 95.60 during Thursday's Asian session.

The greenback gauge tracks US Treasury yields that are firmer than the US Consumer Price Index (CPI). This is in spite of market anxiety before the US Consumer Price Index data. Also, cheer risks from US-China or Russia-Ukraine issues. The latest comments by the White House, and the Fed speakers are also contributing to inflation fears.

The US 10-year Treasury yields have halted the previous day's pullback at the highest levels since July 2019, averaging one basis point (bp), near 1.93% as of press time. As inflation fears drive the Fed to a sharp rate increase in March, bond bears have dominated the markets.

The White House (WH), however, expressed expectations for a higher YoY inflation number while saying that "Its irrelevant monthly number will continue trending lower throughout the year." Brian Deese, WH Economic Advisor, stated that there is reason to believe that inflation-boosting factors will slow down over time.

Loretta Mester, President of the Cleveland Fed, supported the March rate increase. Raphael Bostic, President of Atlanta Federal Reserve, told CNBC Wednesday that he hopes they will see an inflation decline. Fed's Bostic stated, "Leaning towards the need for an additional interest rate hike in 2022."

These plays have left S&P 500 Futures indecisive despite Wall Street’s positive performance on tech-rally, strong earnings and a solid performance by Wall Street. Asia-Pacific stocks also saw day-start gains.

The US CPI for January was higher than expected at 7.3% YoY, compared to 7.0% before. This could lead to DXY's continued advances in matching forecasts due to the possibility of a Fed rate hike in March by 0.50%. But, disappointments are not to be taken lightly.

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