The dollar index (DXY00) today is slightly higher on some short-covering from last Friday’s 2-month low. The dollar index is also seeing some support from today’s +2.1 bp rise in the 10-year T-note yield, which modestly improved the dollar’s interest rate differentials.
The FX markets are looking ahead to Tuesday’s U.S. CPI report, which will impact the odds for a Fed interest rate cut over the next few months. The consensus is for tomorrow’s Feb U.S. CPI to be unchanged from Jan at +3.1% y/y, which would be 0.1 point above the 2-3/4 year low of +3.0% posted in June 2023. The Feb core CPI is expected to ease to a new 2-3/4 year low of +3.7% y/y from Jan’s current 2-3/4 year low of +3.9% y/y.
