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  • The index reverses part of the recent acute sell-off.
  • US yields remain directionless across the curve on Friday.
  • Flash Michigan Consumer Sentiment will be next on tap.

The greenback’s recovery picks up extra pace and revisits the 102.65/70 band when gauged by the USD Index (DXY) on Friday.

USD Index meets contention around 102.00

Following the earlier retracement to levels just below the 102.00 mark, the index manages to regain some composure and advance to the 102.60 region on the back of the profit talking sentiment in the risk complex.

In the US money markets, yields across the curve advance marginally as market participants continue to assess Thursday’s soft US inflation figures for the month of December and the expected impact on the Fed’s tightening cycle.

Later in the session, the advanced reading of the Michigan Consumer Sentiment is predicted to have improved a tad to 60.5 for the current month.

What to look for around USD

The dollar remains under pressure despite the firm rebound from post-US CPI lows near 102.00, an area last visited back in June 2022.

Another soft prints from US inflation figures in December prop up the idea of a probable pivot in the Fed’s policy in the next months, which also comes in contrast to the hawkish message from the latest FOMC Minutes and recent rate-setters, all pointing to the need to remain within a restrictive stance for longer, at the time when the likelihood any interest rate reduction in the current year remains near zero.

On the latter, the tight labour market and the resilience of the economy are also seen supportive of the firm message from the Federal Reserve and its hiking cycle.

Key events in the US this week: Flash Michigan Consumer Sentiment (Friday).

Eminent issues on the back boiler: Hard/soft/softish? landing of the US economy. Prospects for further rate hikes by the Federal Reserve vs. speculation of a recession in the next months. Fed’s pivot. Geopolitical effervescence vs. Russia and China. US-China trade conflict.

USD Index relevant levels

Now, the index is gaining 0.14% at 102.38 and faces the next hurdle at 105.63 (monthly high January 6) followed by 106.39 (200-day SMA) and then 107.19 (weekly high November 30). On the other side, the breach of 102.07 (monthly low January 12) would open the door to 101.29 (monthly low May 30) and finally 100.00 (psychological level).

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