US Dollar Has Touched Highest Level Since December

The DXY Index surged around 103.40, marking the highest level the US Dollar has been since mid-December. This was mostly caused by US traders coming back from vacation, which was further supported by a gradual increase in yields.

Markets are pricing in another rate decrease in May as part of the Fed’s easing cycle, which is expected to start in March and could limit further gains for the US dollar. The market is unyielding in the face of higher CPI figures and believes the Fed will start its easing cycle sooner rather than later.

US bond yields are edging higher, with the 2-year yield at 4.20%, the 5-year yield at 3.90%, and the 10-year yield at around 4%. Forward-looking markets anticipate no hike in the upcoming January meeting, with low probabilities of a rate cut. Additionally, markets are now pricing in higher odds of rate cuts in March and May 2024.

The Relative Strength Index shows a positive slope in positive territory, indicating increasing bullish momentum.