USD Outlook: Inflation data becomes key market driver, US dollar index falls
2025-10-23 00:17:49
The US Dollar Index (DXY) fell slightly, down 0.09%, to 98.864 during U.S. trading on Wednesday (October 22). The recent rally paused near key support levels as the U.S. government shutdown disrupted economic data releases, leading traders to adopt a cautious approach. Friday's delayed CPI report will be the next key factor determining market trends.
After three consecutive days of gains, the US dollar stagnated in the support range
The US Dollar Index traded between 99.139 and 98.836. The index briefly tested the upper limit of the 98.797-98.8714 support range before retreating. This range is crucial: a break below the 98.714 Fibonacci level could lead to further declines towards the 50% retracement level of 98.238 and the 50-day moving average of 98.078, which halted the index's decline last week. Upside potential remains towards 99.5549, but price action is likely to remain limited without a short-term bullish catalyst.
Yields remain stable, reflecting cautious sentiment ahead of CPI release
U.S. Treasury yields remained stable as traders adjusted their positions for Friday's inflation data. The benchmark 10-year Treasury yield was steady around 3.974%, while the 2-year and 30-year yields were unchanged at 3.457% and 4.549%, respectively. With all other economic reports suspended, CPI data will be the sole driver of interest rate expectations until the Federal Reserve's meeting on October 29th.
Federal funds futures indicate a 97.3% probability of a 25 basis point rate cut by the Federal Reserve, down slightly from 99.4% the previous day. Analysts said that if inflation data falls short of expectations, the Fed will have room to ease further; if the data is stronger than expected, the Fed may slow its easing pace.
Pound weakens, yen rebounds on fiscal signals
UK inflation data fell short of expectations, coming in at 3.8%, sending GBP/USD down 0.4% to 1.3318. This further reinforced market expectations of a possible Bank of England rate cut in December. Meanwhile, the yen edged up to 151.85 against the dollar following confirmation that new Japanese Prime Minister Sanae Takaichi will implement a massive economic stimulus package. Traders are watching to see whether the Bank of Japan (which next meets on October 30) will coordinate policy action with the government.
Market Outlook: USD may remain range-bound before CPI is released
(Source of US Dollar Index daily chart: Yihuitong)
The US dollar index is currently holding steady above 98.714, and with no new data to drive the market, it is expected to remain range-bound. Traders will be watching Friday's CPI data as the next volatility trigger. If the data beats expectations, the index could push towards 99.5549; a break below 98.714 could trigger further declines. Until then, price action is expected to remain range-bound between 98.714 and 99.134.
After three consecutive days of gains, the US dollar stagnated in the support range
The US Dollar Index traded between 99.139 and 98.836. The index briefly tested the upper limit of the 98.797-98.8714 support range before retreating. This range is crucial: a break below the 98.714 Fibonacci level could lead to further declines towards the 50% retracement level of 98.238 and the 50-day moving average of 98.078, which halted the index's decline last week. Upside potential remains towards 99.5549, but price action is likely to remain limited without a short-term bullish catalyst.
Yields remain stable, reflecting cautious sentiment ahead of CPI release
U.S. Treasury yields remained stable as traders adjusted their positions for Friday's inflation data. The benchmark 10-year Treasury yield was steady around 3.974%, while the 2-year and 30-year yields were unchanged at 3.457% and 4.549%, respectively. With all other economic reports suspended, CPI data will be the sole driver of interest rate expectations until the Federal Reserve's meeting on October 29th.
Federal funds futures indicate a 97.3% probability of a 25 basis point rate cut by the Federal Reserve, down slightly from 99.4% the previous day. Analysts said that if inflation data falls short of expectations, the Fed will have room to ease further; if the data is stronger than expected, the Fed may slow its easing pace.
Pound weakens, yen rebounds on fiscal signals
UK inflation data fell short of expectations, coming in at 3.8%, sending GBP/USD down 0.4% to 1.3318. This further reinforced market expectations of a possible Bank of England rate cut in December. Meanwhile, the yen edged up to 151.85 against the dollar following confirmation that new Japanese Prime Minister Sanae Takaichi will implement a massive economic stimulus package. Traders are watching to see whether the Bank of Japan (which next meets on October 30) will coordinate policy action with the government.
Market Outlook: USD may remain range-bound before CPI is released
(Source of US Dollar Index daily chart: Yihuitong)
The US dollar index is currently holding steady above 98.714, and with no new data to drive the market, it is expected to remain range-bound. Traders will be watching Friday's CPI data as the next volatility trigger. If the data beats expectations, the index could push towards 99.5549; a break below 98.714 could trigger further declines. Until then, price action is expected to remain range-bound between 98.714 and 99.134.
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