Traders reduce expectations for Federal Reserve rate cuts this year amid rising US inflation and stronger economic data.
The US Dollar Index (DXY) remains steady around 98.50 in Asian trading, supported by waning bets on Federal Reserve rate cuts. Market sentiment shifted after April’s Consumer Price Index (CPI) rose 3.8% year-on-year, exceeding March’s 3.3% print, while Producer Price Index (PPI) surged to 6% against 4.9% estimates.
The CME FedWatch tool now shows a 66.8% probability of the Fed maintaining current rates through year-end, with a 32.2% chance of a hike. Earlier expectations for cuts have dissipated as inflationary pressures persist, driven by higher energy costs and robust economic indicators.
The dollar strengthened most against the Japanese Yen this week, reflecting broader risk sentiment and diverging monetary policy outlooks.