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FX Week Ahead: DXY slips as hot PPI jolts markets
The United States dollar index (DXY) eased 0.2% last week as a hotter-than-expected inflation print deepened concerns that price pressures remain sticky, complicating the Federal Reserve’s policy outlook and fuelling stagflation fears. The DXY settled 0.1% lower on Friday at 97.646 after January’s producer price index (PPI) rose 0.5% month-on-month, well above the 0.3% consensus forecast. The reading followed a downwardly revised 0.4% increase in December and left producer prices up 2.9% year-on-year. Although much of the upside surprise was concentrated in trade services – a volatile category that does not always reflect real-time price shifts – the broader takeaway for markets was that wholesale inflation is not cooling as quickly as hoped. The data feeds into the Federal Reserve’s preferred measure of inflation, the personal consumption expenditures (PCE) gauge, and is likely to reinforce the central bank’s cautious stance after it held rates at 3.50% to 3.75% in January. Minutes from the Fed's most recent meeting showed policymakers divided, with some officials flagging the possibility of renewed tightening should inflation fail to moderate. Money markets have since pushed the first fully priced rate cut to J
Currencies
FX Week Ahead: DXY gains 0.9% on week amid tariff shock
The United States dollar index (DXY) ended Friday modestly lower, surrendering earlier gains but still finishing 0.9% higher on the week, after the Supreme Court of the United States struck down President Donald Trump’s sweeping tariffs imposed under the International Emergency Economic Powers Act (IEEPA). The ruling, delivered in a 6–3 decision, concluded that the IEEPA does not authorise the president to impose tariffs. The decision invalidates the so-called “Liberation Day” reciprocal tariffs and the 25% IEEPA-based duties on Canada, China and Mexico, although measures introduced under other trade statutes remain intact. Among data releases, U.S. fourth-quarter gross domestic product (GDP) expanded at an annualised 1.4%, sharply below the 3.0% expected and decelerating markedly from the previous quarter’s 4.4% pace. The government shutdown during Q4 is estimated to have shaved up to 1.5 percentage points off headline growth, compounding concerns over slowing momentum. At the same time, inflation data offered little comfort. The personal consumption expenditures (PCE) price index rose 2.9% year-on-year in December, slightly above expectations. Core PCE accelerated to 3.0% from 2.8%, exceeding the 2.9% forecast. On
Currencies
ECB expands Euro liquidity backstop globally
The European Central Bank has announced plans to expand and permanently establish its euro liquidity backstop, opening access to central banks worldwide in a move designed to strengthen the single currency’s global standing. Speaking at the Munich Security Conference, ECB President Christine Lagarde said the central bank must adapt to a more uncertain global environment. It marked the first time an ECB chief has addressed the high-profile forum. “The ECB needs to be prepared for ⁠a more volatile environment,” Lagarde said. “We must avoid a situation where that stress triggers fire sales of euro-denominated securities in global funding markets, which could hamper ‌the transmission of our monetary policy,” she said in announcing the new facility. Under the revised framework, the ECB’s repo lines, previously limited to a small number of mostly Eastern European countries, will become globally available and permanent from the third quarter of 2026. Access will be open to all central banks, unless excluded for reputational reasons such as money laundering, terrorist financing or breaches of international sanctions. The facility will provide standing access of up to €50 billion, replacing earlier arrangements that requi
Currencies
FX Week Ahead: US dollar slips on softer CPI
The United States dollar index (DXY) ended the week on a softer footing after inflation data reinforced expectations that the Federal Reserve could begin easing policy later this year. The DXY, which tracks the greenback against six major currencies, settled below the 97 mark after January’s consumer price data showed inflation easing more than expected. The index, which had held positive territory for three straight sessions earlier in the week, lost momentum as Treasury yields extended their decline following the release. Headline U.S. inflation slowed to 2.4% year-on-year in January, down from 2.7% previously and below expectations of 2.5%. On a monthly basis, the consumer price index rose 0.2%, easing from December’s 0.3% pace. Core inflation, which strips out food and energy, came in at 2.5% annually, the lowest level since April 2021 and in line with forecasts. The data provided tentative evidence that price pressures continue to moderate, despite a resilient labour market. Markets are now pricing in two rate cuts in 2026, with the first likely in the second half of the year. According to the CME FedWatch Tool, traders see a roughly 91% probability that the Federal Reserve will leave rates unchanged at its
Currencies
FX Week Ahead: DXY ticks up after two weeks of decline
The United States dollar index (DXY) ticked up after two consecutive weeks of declines, finishing the week 0.6% higher despite softer labour market data reinforcing expectations of the Federal Reserve easing rates later this year. While the Greenback attempted a brief recovery midweek, renewed dovish bets ultimately capped gains and kept the broader tone defensive. Markets are now pricing in two rate cuts in 2026, beginning as early as June, as evidence of cooling employment conditions continues to accumulate. According to the CME FedWatch Tool, traders see a 77.3% probability that the Fed will leave rates unchanged at its March meeting, before pivoting to easing in the middle of the year. U.S. economic data painted a mixed but generally softer picture. Initial jobless claims rose to 231,000 in the week ending January 31, exceeding forecasts of 212,000 and the previous reading of 209,000. Meanwhile, ADP reported that private payrolls increased by just 22,000 in January, well below expectations of 48,000 and the prior 37,000. Although the preliminary University of Michigan Consumer Sentiment Index improved to 57.3 in February from 56.4 in January, beating expectations of 55.0, the index remains roughly 20% below its

Currencies
FX Week Ahead: DXY weakens; Fed pick caps losses
The United States dollar index (DXY) extended its decline for a second consecutive week, pressured by a cautious Federal Reserve stance and persistent political noise, even as rate markets attempted to stabilise following fresh signals on central bank leadership and inflation dynamics. While the Greenback managed to recover from its worst levels after the latest Federal Open Market Committee (FOMC) meeting, broader sentiment towards the currency remains fragile. The DXY slid towards the 95.23 region during the week, a level last seen in early 2022, before paring losses. The rebound followed the Fed’s decision to leave interest rates unchanged and President Donald Trump’s nomination of Kevin Warsh as successor to Jerome Powell, developments that temporarily steadied U.S. yields and the currency. Meanwhile, the Fed held benchmark rates steady in the 3.50%–3.75% range, in line with expectations last week. Chair Jerome Powell described the current stance as appropriate, pointing to labour market stabilisation and gradual progress on services inflation. He stressed that policy decisions would remain meeting by meeting and that rate hikes are not the base case. However, officials acknowledged that inflation remains abo
Currencies
FX Week Ahead: DXY gains for third consecutive week
The United States dollar index (DXY) lifted for the third straight week, despite intermittent support from firm U.S. economic data and cautious Federal Reserve rhetoric. The DXY added 0.2% over the week to finish at 99.38 on Friday, with markets reluctant to add exposure ahead of a long holiday weekend in the United States, correcting from a six-week high near 99.49. Dollar sentiment was briefly underpinned earlier in the week after Kansas City Fed President Jeffrey Schmid and Atlanta Fed President Raphael Bostic reiterated the need for a modestly restrictive monetary policy stance amid persistent inflation risks. Schmid warned that premature rate cuts could aggravate price pressures, noting that inflation remained “too hot” to justify aggressive easing. December U.S. consumer price index data last week showed price pressures holding steady, reinforcing expectations that the Federal Reserve will proceed cautiously. Meanwhile, analysts at ING said the U.S. dollar’s recent firmness reflects a broader macro repricing, driven by resilient U.S. data, rising Treasury yields and strong foreign inflows into U.S. assets. They added that meaningful dollar weakness would likely require lower U.S. rates or increased foreign
Currencies
FX Week Ahead: DXY falls to multi-month lows
The United States dollar index (DXY) declined 0.7% last week, hovering at multi-month lows of 98.05 as markets continued to price in a more accommodative Federal Reserve policy outlook for 2026. Holiday-thinned trading conditions kept moves relatively contained, but sentiment remained tilted against the Greenback amid expectations of two U.S. rate cuts next year. Despite a rebound in U.S. Treasury yields, the DXY struggled to attract sustained demand. The 2-year and 10-year yields rose back towards 3.53% and 4.16% respectively, although markets continued to judge that stronger economic data would not prevent policy easing further out. U.S. economic releases were also mixed for the dollar. Preliminary data showed annualised gross domestic product (GDP) growth of 4.3% in the July–September quarter, well above expectations and the previous quarter’s 3.8% expansion, while the core PCE price index rose 2.9% quarter-on-quarter, in line with forecasts. However, commentary from the White House added to pressure on the currency. White House adviser Kevin Hassett said the Fed was cutting rates too slowly despite the stronger-than-expected growth outcome, according to CNBC. Fed Governor Stephen Miran also warned that failing t
Currencies
FX Week Ahead: US dollar ticks up after CPI surprise
The United States dollar index finished last week higher, up 0.3% at 98.72 on Friday, and snapped three consecutive weeks of declines. Gains in the U.S. dollar index (DXY) were modest, as markets continued to digest signs that inflation pressures in the United States are easing faster than expected. The latest consumer price index data briefly weighed on the Greenback after the U.S. Bureau of Labor Statistics reported that headline CPI slowed to 2.7% in November, below market expectations of 3.1%. Core CPI, which strips out food and energy prices, rose 2.6%, also undershooting forecasts of 3.0% and marking the slowest pace of underlying inflation since 2021. Some doubts about the durability of the inflation slowdown emerged on Friday, after New York Fed President John Williams said CPI figures “may have been pushed down a bit” in comments to CNBC. Earlier last week, the Federal Reserve delivered a widely expected 25-basis-point interest rate cut, reinforcing expectations that policy is shifting gradually towards easier settings. Labour market data sent mixed signals. Initial jobless claims fell to 224,000, better than expectations of 225,000, though broader indicators still point to a gradual cooling in employmen