The market was more confident in buying the US dollar, as some Federal Reserve officials emphasized the importance of patience in policy making.

The release of disappointing US producer inflation data yesterday dampened the US Dollar rally. However, the US Dollar Index (DXY) skyrocketed more than 0.5% to 105.80s in the Asian session on Friday (12/April) due to the speeches of several Fed officials. The Dixie is now perched at its highest level since November 13, 2023.

usd

Thursday's release of US PPI inflation data missed consensus expectations slightly. However, the data was unable to quash the hawkish beliefs of the market that spread in connection with the recalcitrant CPI inflation data.

Most traders continue to believe that the Federal Reserve will keep interest rates high for longer to control the pace of inflation, so monetary easing is unlikely to begin in June. Moreover, several Federal Reserve officials emphasized the importance of patience in policy making.

New York Fed President John Williams said the central bank does not yet need to adjust monetary policy due to volatile inflation movements in the current economic conditions. He said, "There is no clear need to adjust monetary policy in the near term".

Richmond Fed President Thomas Barkin echoed the same sentiment. He doubts that inflationary pressures have eased to a large extent in the US economy, given that some of the latest inflation data have strengthened.

CME FedWatch now shows the closest chance of 69% for a Fed rate cut starting September. The data also shows a reduction in the expected frequency of Fed rate cuts this year from around three to four times to less than two times. The US dollar was boosted by these changes in market expectations in the short term.

"Market-implied interest rate expectations have not changed significantly from yesterday's levels, and the very wide interest rate differential is keeping the US dollar elevated," said Karl Schamotta, chief market strategist at Corpay Toronto, as reported by Reuters.

The greenback also benefited from yesterday's dovish ECB statement and disappointing Chinese trade balance data this morning. Markets now expect the ECB to start cutting interest rates in June, while China may have to launch another stimulus to stimulate its economy.

At the time of writing at the start of the European session, EUR/USD and AUD/USD have lost more than 0.6% each intraday. GBP/USD has also slipped more than 0.5% despite UK GDP data for February 2024 coming in line with forecasts.