US Dollar Index Tumbles As US Retail Sales Awaited

The US dollar index (DXY) has witnessed a sheer downside after recording a fresh three-year high at 100.52 on Wednesday. The DXY ended its nine-day winning streak on Wednesday after investors shrugged off the hangover of the higher US Consumer Price Index (CPI). The US Bureau of Labour Statistics reported the yearly US inflation at 8.5% and also improved the certainty of a jumbo interest rate hike by the Fed in May. US PPI landed at a 12-year high of 11.2%

The US Labour Statistics agency reported the US Producer Price Index (PPI) on Wednesday. A print of 11.2%, remarkably higher than the market consensus of 10.6% and the prior figure of 10.3%. It is worth noting that the yearly print of 11.2% is the highest recorded since November 2010.

A notable higher reading of the US PPI is going to hurt the corporate profits as the higher commodity prices will dampen the margins of the corporate and henceforth the pass on of higher input prices to the households will reduce their real income. This has weighed pressure on the DXY.

Fed Governor Christopher Waller in his speech on Wednesday favored an aggressive interest rate hike going forward but aggressiveness should not be mixed with abruptness as it may lead the US economy into recession.

“I don’t see value in trying to shock the markets also we are not in a Volcker kind of moment,” Waller added. Investors should be aware of the fact that Fed Chair Paul Volcker shot the interest rates by 400 basis points at a time to battle the prolonged inflation.

Investors are shifting focus to the US Retail Sales data which is due on Thursday. The market consensus sees the monthly US Retail Sales getting doubled to 0.6% than the previous figure.