Skip to content

CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex financial instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

US dollar slides to new lows after Fed cites CPI as key to hikes

The US dollar softened today as Fed speakers put forward their case; China re-opening might get a further boost from stimulus measures and risk and growth-linked assets are benefitting from the tilt. Will that sink USD?

Source: Bloomberg

The US dollar remains vulnerable through Asia today, following on from the weakness seen in the US session that saw the US dollar index (DXY) make a seven-month low.

Overnight, Federal Reserve Bank of San Francisco President Mary Daly and her Atlanta equivalent, Raphael Bostic both pointed toward the Fed’s rate path potentially heading toward and above five percent by the middle of the year.

This is higher than what the futures and swaps markets are currently pricing in. The commentary also appeared to open the way for a 25 basis-point (bp) hike at the February Federal Open Market Committee (FOMC) meeting.

A crucial element emphasised in the debate between a 25 or 50 bp lift will be US CPI this Thursday, with a Bloomberg survey of economists anticipating 6.7% year-on-year to the end of 2023.

While the Fed continues to talk tough on slowing growth to fight inflation, the market seems to think that rate cuts could be coming later this year.

Elsewhere, it is being reported that Beijing is considering allowing local governments to take on more debt for infrastructure projects. Base metals have gained on the prospect of China resuming higher industrial production levels as the world’s second-largest economy re-opens.

China’s re-opening has aided risk assets in general with growth-linked currencies such as the Aussie, Kiwi and Loonie notching up sizable gains so far this week.

The DXY index is a US dollar index that is weighted against EUR (57.6%), JPY (13.6%), GBP (11.9%), CAD (9.1%), SEK (4.2%) and CHF (3.6%).

Not surprisingly, the DXY index made its seven-month low at the same time that EUR/USD made a seven-month high yesterday. Sterling also appreciated notably as it made a one-month peak against the dollar. All other currencies in the index have outperformed the ‘big dollar’.

Ahead of Thursday’s US CPI data, Fed Chair Jerome Powel is due to speak later today (Tuesday) and his words will be probed for clues on his thoughts for monetary policy going forward.

DXY (USD) INDEX, EUR/USD, GBP/USD

Source: TradingView

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.


This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.

Start trading forex today

Find opportunity on the world’s most-traded – and most-volatile – financial market

  • Trade spreads from just 0.6 points on EUR/USD
  • Analyse with clear, fast charts
  • Speculate wherever you are with our intuitive mobile apps

See an FX opportunity?

Try a risk-free trade in your demo account, and see whether you’re onto something.

  • Log in to your demo
  • Try a risk-free trade
  • See whether your hunch pays off

See an FX opportunity?

Don’t miss your chance – upgrade to a live account to take advantage.

  • Get spreads from just 0.6 points on popular pairs
  • Analyse and deal seamlessly on fast, intuitive charts
  • See and react to breaking news in-platform

See an FX opportunity?

Don’t miss your chance. Log in to take your position.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Friday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.