The US dollar regains its strength after the release of important economic data!

The US dollar witnessed a notable recovery during trading on Thursday, following the release of significant economic data, most notably the US Producer Price Index data, which raised questions about the Federal Reserve's next steps in its monetary policy.

Dollar's Performance Boosted by Producer Price Index Data

The US Bureau of Labor Statistics released data for the Producer Price Index for November, which exceeded expectations. The data showed a growth in the US Producer Price Index of 3.0% year-on-year, surpassing forecasts that indicated a growth of 2.6%, while the October reading was revised to 2.6% from 2.4%.

Additionally, the core Producer Price Index (excluding food and energy prices) recorded a growth of 3.4% year-on-year, higher than market expectations of 3.2%, compared to an October reading that showed a growth of 3.1%. This positive data bolstered confidence in US inflation, supporting the performance of the US dollar.

Support from Rising US Bond Yields

The US dollar also benefited from rising US bond yields, with the yield on 10-year bonds increasing by 0.49% to reach 4.293%. The yield on 20-year bonds saw an increase of 0.89%, reaching 4.593%, while the yield on 30-year bonds rose by 0.89% to reach 4.518%. This jump in yields strengthened the US dollar's position in the market.

Pressure from Rate Cut Expectations

Nevertheless, the US dollar faced pressure due to increasing expectations of interest rate cuts, as current estimates indicate a 98.1% chance that the Federal Reserve will reduce rates by 25 basis points at its next meeting, while the chances of keeping rates unchanged do not exceed 1.9%.

How Did the Dollar Index React to These Developments?

Amid these intertwined factors, the US Dollar Index rose by 0.26%, reaching a level of 106.89 points. However, investors remain cautiously vigilant, looking forward to the impending decisions from the Federal Reserve next week, which will be crucial in determining the direction of the US dollar in the coming period.

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