The dollar gives up its gains and awaits the inflation data preferred by the Federal Reserve!

The dollar index recorded noticeable losses during trading on Wednesday, giving up gains from the previous session, as markets await the release of consumer spending data, which is considered the preferred inflation indicator for the U.S. Federal Reserve. The data is set to be released shortly and could be crucial in determining the dollar's direction during trading.

Here’s a look at the main factors influencing dollar movements:

The dollar is negatively affected by weak U.S. bonds:

The U.S. dollar has been clearly impacted by weakening yields on bonds of various maturities, as the yield on 10-year Treasury bonds fell by 0.79% to reach 4.271%. Additionally, the yield on 20-year bonds dropped by 0.77% to 4.535%. Furthermore, the yield on 30-year bonds rose by 0.62% to settle at 4.452%. This weakness in U.S. bond yields contributed to the decline of the dollar.

Expectations for U.S. interest rate cuts boost the dollar's decline:

Alongside weak bond yields, the U.S. dollar has also suffered as market expectations grow that the Federal Reserve will cut interest rates by around 25 basis points during its next meeting, especially after the Federal Reserve's minutes indicated that the bank would continue its gradual rate-cutting path.

In this context, the probability of a U.S. interest rate cut by 25 basis points has risen to 62.8%, while the likelihood of keeping rates unchanged is estimated at 37.2%. This has negatively influenced dollar trading.

The dollar awaits the preferred inflation index for the Federal Reserve:

As the release of the U.S. personal consumption expenditures index, which is considered the preferred inflation indicator for the Federal Reserve, approaches, anticipation is growing in the markets. This data is expected to influence upcoming U.S. interest rate decisions, and if the reading comes in below expectations, it could strengthen the likelihood of a rate cut during the upcoming December meeting, which will certainly reflect on the performance of the U.S. dollar in the near term.

Impact of these developments on the U.S. dollar index:

In light of these factors, the U.S. dollar index has fallen by 0.47% to settle at 106.37 points. It is awaiting the release of consumer spending data that will clearly impact its trading.

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