US Dollar trades flat after hot PPI figures ahead of FOMC minutes

The US dollar is still having trouble gaining traction. In September, US PPI increased by 2.2% YoY, exceeding expectations. Later in the afternoon, the FOMC will make public its minutes from its meeting in September.

Despite the tension between Israel and Hamas, markets are still wary. Following the publication of trending Producer Price Index (PPI) data and before the release of the Federal Open Market Committee (FOMC) minutes, the US Dollar (USD), as measured by the US Dollar DXY Index, trades with slight losses. Additionally, the Palestinian conflict has intensified, which can lead investors to seek safety in the green money.

Investors will closely watch the FOMC meeting minutes from September in order to gather information about the Federal Reserve’s (Fed) next move given that the US economic indicators do not indicate a slowdown.

It’s important to note that although the bank previously decided to leave rates stable at a range of 5.25-5.50%, the so-called “dot plot” showed that the majority of members perceive a strong likelihood of an additional hike in this cycle. Additionally, forecasts indicated that rate decreases would be postponed, indicating that the Fed might keep its restrictive policy in place at higher levels for a longer period of time.

Daily Digest Market Movers: The US dollar is consolidating its gains from the previous week; a healthy US economy and rising geopolitical tensions in the Middle East may give it another boost.
The US Dollar DXY index is trading at 105.80 and is still in a state of consolidation. The US Producer Price Index (PPI) increased to 2.2% in September, which is the same as the previous 2.2% and more than the predicted 1.6%.

The Federal Open Market Committee (FOMC) minutes, which will be made public later in the trading day, will provide additional hints about the Federal Reserve’s (Fed) position.
According to the most recent Fed prediction, the dot plot interest rate projections for 2023 stayed at 5.6%, increasing the likelihood of a subsequent 25 basis point (bps) increase.

For 2024, the median Fed funds target rate was revised to 4.6% vs the 4.3% March projections, meaning that the Fed is delaying rate cuts. During the Press conference, Jerome Powell noted that monetary policy decisions will still depend on incoming data.