Dollar index stays firm despite possibility of Fed rate cut; Trump tariffs could derail US inflation progress, says Yellen

The dollar index reduced some of its previous gains amid increasing probability that Fed would cut interest rates in its upcoming policy meet after the US Consumer Price Index (CPI) came broadly in line of expectations. The monthly headline Inflation came in as expected at 0.3%, from 0.2%. The yearly gauge ticked up to 2.7% from 2.6% whereas the monthly core inflation increased by 0.3%, the same pace as the previous month. The US 10-year benchmark rate retreated to 4.21% post the data but regained back to 4.28% this morning and dollar index that measures the greenback against a basket of currencies is down 0.14% on the day but still firm above 106 mark at 106.24.

DXY has eased from last months 107 mark buts still stays in close proximity to it as possibility of Fed rate cut is seen offset by possible Trump tariffs that could once again accentuate inflationary trend in the US. U.S. Treasury Secretary Janet Yellen said on Tuesday she was worried that President-elect Donald Trump's plans to levy broad import tariffs could derail progress in quelling inflation. Trump's plans to impose new tariffs of 60% on Chinese imports and 10% to 20% on goods from elsewhere would "raise prices significantly for American consumers and create costs pressures" on companies," Yellen said. Focus will now shift to Thursday with the US Producer Price Index. Among basket currencies, EURUSD and GBPUSD are quoting higher by 0.15% at $1.0507 and $1.2765 respectively.

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