Does potential further downside await US Dollar?

The US Dollar Index has recovered to 104.40, its lowest point since September. The US Producer Price Index (PPI) saw a less-than-expected 1.3% YoY increase in October, falling short of the projected 1.9% rise.

The Core Producer Price Index (PPI) also fell short of expectations, coming in at 2.4% YoY vs the expected 2.7% and declining from its previous reading of 2.7%. Retail Sales from October came in better than expected, declining by 0.1% MoM vs the expected 0.3% decline.

US Treasury yields slightly recovered, with the 2-year rate increasing to 4.91%, while the 5- and 10-year rates rose to 4.52% and 4.53%, respectively. The odds of a 25-basis-point hike in December are zero, and markets are betting on rate cuts appearing sooner than expected in May 2024, if not March.

The Federal Reserve’s decision to raise interest rates at its upcoming December meeting is highly unlikely, as inflation and employment creation in the US economy are both cooling down.