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The U.S. dollar retreated following four consecutive sessions of gains, as market participants assessed mixed signals ahead of next week’s Federal Reserve policy meeting.
While yesterday’s inflation report aligned with expectations and reinforced the likelihood of a 25-basis-point rate cut, the greenback faced downward pressure.
However, high core CPI and uncertainty surrounding President-elect Donald Trump’s proposed tariff and tax policies, which could drive inflation higher, leave the Federal Reserve’s stance uncertain heading into 2025.
U.S. Treasury yields continued to climb with the 10-year note stabilizing near the 4.30% level, providing some support to the dollar. Market focus now shifts to today’s Producer Price Index (PPI) report, a key measure of inflation trends. A moderation in PPI could maintain pressure on the dollar by strengthening expectations for additional rate cuts, while persistent inflation could support the currency.
Attention also centers on rate decisions from the European Central Bank and the Swiss National Bank, which could weigh on their respective currencies relative to the dollar. Additionally, speculation surrounding the Bank of Japan’s policy stance, amid indications of unchanged rates, could lend further stability to the greenback.
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