The US dollar index fell as risk pared its losses, and following Janet Yellen’s comment that it is possible we have seen the last of Fed rate hikes for this cycle. There is some analysis from investment banks, which shows that hedge funds have been selling the US dollar over the last four weeks, mostly against the EUR, GBP & AUD, and have been buying emerging market FX in all regions, albeit in small amounts.
The immediate key drivers of the US dollar and risk appetite for this week are the earning seasons in the US, Prime Minister May’s Brexit deal (which is expected to be voted down in Parliament later today), and the G20 Finance Ministers and Central Bank Governors’ meeting from January 16-18th.
On the release side, the Producer Price Index (PPI) final demand month to month for December came in at -0.2 percent, while the forecast was -0.1 percent. The PPI year to year was in line with the forecast at 2.5 percent. The PPI ex-food, energy, and trade month to month came in at 0 percent versus 0.2 percent however. These results are pushing the US dollar lower again this morning.