Dollar index pulls back to one-week low despite higher than expected US inflation reading

The dollar index has been on falling since the start of the week from its recent highs and is seen extending downside on Thursday despite a higher than expected US inflation reading. Hawkish tone by Powell and higher consumer prices data is supposed to drive dollar higher. The US Consumer Price Index (CPI) climbed above 3% annually for the first time in six months, exceeding forecasts and Decembers 2.9% increase. This rise underscores the ongoing challenge for the Federal Reserve in controlling sticky inflation. Core CPI which excludes volatile items rose by 3.3% on year, up from 3.2%, above forecasts of 3.1%. Moreover, yield on the benchmark 10-year US government bond is at over 4.6% which should have acted as a tailwind for the greenback. Also, Trumps presidency that was expected to strengthen demand for the US dollar is seen acting otherwise on likelihood of a possible negative repercussion for the US economy that could leave investors shed dollar for better prospects. Notable rise in EURUSD and GBPUSD , both up around 0.40% today are seen weighing down on the index. The US dollar index that measures the greenback against a basket of currencies is quoting at 107.45, down 0.35% on the day and at a near one-week low. Investors now look forward to Thursday's US economic docket, featuring the release of the Producer Price Index (PPI) and the usual Weekly Initial Jobless Claims data later on.

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