Dollar unable to capitalize on hot inflation prints

US producer prices come in hot, but dollar cannot sustain gains - Stock markets take a step back, Nvidia earnings to set the tone - Gold recovers recent losses with some help from geopolitics
XM Group | 605 วันที่ผ่านมา

Dollar not impressed

The US economy continues to run hot. Incoming data point to solid economic growth, the labor market remains tight, and inflation is not cooling down as quickly as investors had hoped. Last week’s releases reaffirmed this narrative, with both consumer and producer prices rising by more than expected in January.

Faced with a resilient economy and persistently high inflation readings, traders have been forced to unwind bets of imminent Fed rate cuts. The timing of the first cut has been pushed out to June, while the market is now pricing in less than four cuts in total for this year, down from six recently.

With markets shifting towards a ‘higher for longer’ path for US interest rates, the dollar has received a boost to become the best-performing major currency of this year. That said, the dollar’s gains have not been too impressive, something that was on full display last week when the greenback barely advanced despite the upside inflation surprises. 

One element that has prevented the dollar from appreciating more significantly in this environment is the cheerful tone in stock markets, which has dampened demand for safe haven assets. Hence, a correction in equities might be the missing ingredient for the dollar to shine brighter, especially now that foreign economies are slipping into technical recessions.

Stock markets waiting on Nvidia results

Speaking of equities, shares on Wall Street encountered some turbulence last week after the hot US inflation prints poured cold water on the notion of imminent Fed rate cuts. Nonetheless, the retreat was shallow and all the major indices remain very close to their record highs.

The stock market has been incredibly durable this year even with Fed rate cuts getting priced out and valuations being historically stretched. However, it’s crucial to note that the rally is driven by a handful of tech companies with exposure to artificial intelligence, and that many “older economy” stocks have not participated.

Hence, this is a two-speed market, with investors favoring businesses that are seen as recession-proof thanks to their artificial intelligence income streams, at the expense of more traditional shares and small caps that could suffer as the economic cycle turns.

Nvidia has been at the tip of the spear, having gained more than 46% already this year. This elevates the importance of Nvidia’s quarterly earnings, which will be released on Wednesday. The chipmaker needs to deliver stellar results to keep the rally going.

US markets will remain closed today, in celebration of Presidents’ Day.

Gold licks its wounds, eyes Fed minutes

Gold prices went for a wild ride last week. The precious metal fell sharply after the CPI prints, but managed to recover its losses in the subsequent days with some help from a softer US dollar. Ongoing tensions in the Middle East may have added some fuel to gold through the safe haven channel, following more attacks against cargo ships in the Red Sea.

Looking ahead, the main event this week will be the minutes of the latest Fed meeting on Wednesday. Investors will search for clues on the potential timing of the first rate cut. Since that meeting, several Fed officials have preached patience, warning against premature rate cuts given the resilience of the US economy.

If the minutes echo a similar tone, the dollar could regain some momentum, which in turn might prove negative for gold.

 

XM Group
ประเภท: Market Maker
กฎระเบียบ: CySEC (Cyprus), FSC (Belize), DFSA (UAE), FSCA (South Africa)
read more
Stocks perk up but dollar remains heavy as gold extends gains

Stocks perk up but dollar remains heavy as gold extends gains

Tensions continue to brew between Washington and Beijing. Dollar slips to one-week low, gold marches above $4,200. But upbeat earnings offer support to equities. Euro and yen steadier amid hopes of easing political turmoil.
XM Group | 4 ชม. 21 นาทีที่ผ่านมา
ATFX ​Market Outlook 16th October 2025

ATFX ​Market Outlook 16th October 2025

The Federal Reserve’s Beige Book showed little change in recent U.S. economic activity, but signs of cooling consumption emerged. Morgan Stanley and Bank of America gained on strong quarterly earnings, while investors remained focused on escalating U.S.-China trade tensions. The Dow fell 0.04%, the S&P 500 rose 0.4%, and the Nasdaq advanced 0.66%.
ATFX | 6 ชม. 47 นาทีที่ผ่านมา
Gold Extends Its Rally as Safe-Haven Demand Builds

Gold Extends Its Rally as Safe-Haven Demand Builds

The gold market continues to attract strong inflows, underscoring its appeal as a premier defensive asset. Growing anxieties over a potential US government shutdown are fuelling investor nervousness, with Congress once again at a budget impasse.
RoboForex | 6 ชม. 58 นาทีที่ผ่านมา
Fed’s Dovish Tone Weakens Dollar, Lifts Majors | 15th October 2025

Fed’s Dovish Tone Weakens Dollar, Lifts Majors | 15th October 2025

The US Dollar weakened after Fed Chair Powell’s dovish remarks fueled expectations of a year-end rate cut, lifting major currencies and risk sentiment. Oil stayed subdued near $58 amid oversupply worries, while GBP/USD, EUR/USD, and AUD/USD gained. Traders await key US data and FOMC minutes for policy confirmation.
Moneta Markets | 1 วันที่ผ่านมา