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On January 14th, a research report from CITIC Securities stated that US inflation in December 2025 was lukewarm, with core inflation slightly below expectations and food inflation rising. We believe the US inflation outlook may moderate this year, with tariffs gradually reducing their impact on prices, and services inflation likely maintaining a relatively ideal low-to-medium growth rate. The cost of living is a key issue in the US midterm elections, and Trumps recent directives to Fannie Mae and Freddie Mac to purchase mortgage-backed securities and to limit credit card interest rates are largely in response to voters concerns about affordability. We believe the criminal investigation of Powell by US prosecutors will not help pressure the Federal Reserve to aggressively cut interest rates, and we still expect the Fed to pause rate cuts in January and cut rates twice this year, each time by 25 basis points.On January 14th, a research report from CICC stated that the US December CPI rose 2.7% year-on-year, in line with market expectations; core CPI rose 2.6% year-on-year, lower than market expectations. Looking at the sub-categories, food prices rose sharply, prices of goods related to tariffs remained stable, and both rent and non-rent core inflation rebounded significantly. Looking ahead to 2025, the transmission of Trumps tariffs to inflation is expected to be more moderate than anticipated, with the main inflationary pressure still coming from the service sector. Looking further ahead, attention needs to be paid to whether companies that previously chose to absorb costs internally and have not yet raised prices will catch up, and whether the resilience of the service sector will create structural inflationary pressure. We believe that for the Federal Reserve, moderate inflation data is insufficient to prompt another rate cut in January; we maintain our judgment of keeping rates unchanged in January, with the next rate cut likely in March.On January 14th, according to foreign media reports, palm oil futures on the Malaysian Derivatives Exchange (BMD) are likely to open higher on Wednesday morning, following the upward trend in external markets. Chicago soybean oil futures surged, and international crude oil futures rose for the fourth consecutive trading day, which will help the early performance of Malaysian crude palm oil futures. Strong Malaysian palm oil exports are also beneficial to palm oil prices. Shipping surveyors reported that Malaysian palm oil exports in early January increased by 17.65% to 29.19% month-on-month. However, increased Malaysian palm oil inventories and uncertainty surrounding the implementation of Indonesias B50 biofuel policy will constrain the upward momentum of the market. A senior Indonesian official stated that under current price conditions, the Indonesian president has instructed that the B40 blending ratio be maintained. Whether a B50 blending policy will be implemented in the future will depend on the price difference between crude oil and crude palm oil. Indonesia previously stated that it will implement the B50 policy in the second half of 2026.Sources say Felix Plasencia, head of the Venezuelan mission in the UK, plans to visit Washington on Thursday.Kuaishou (01024.HK) announced on the Hong Kong Stock Exchange its plan to issue US dollar and RMB senior notes. The net proceeds from the issuance are intended to be used primarily for general corporate purposes. The aggregate principal amount, interest rate, payment date, and certain other terms and conditions of the notes have not yet been determined.

With an eye on ECB policies, the US Dollar Index defends its recovery from a two-week low of 107.00

Daniel Rogers

Jul 21, 2022 11:40

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After recovering from a two-week low the previous day, the US Dollar Index (DXY) hovers at 107.05. In doing so, the dollar index reflects market trepidation before to a major monetary policy meeting of the European Central Bank (ECB). The day before yesterday, the DXY had its first daily rise in four days.

 

Market concerns about a European recession and strong inflation data from the UK and Canada may be to blame for the DXY's increase. The demand for safe haven assets such as the US dollar increased as a result of Sino-American tensions and China's covid problems.

 

Vladimir Putin, the president of Russia, reportedly said that it is unclear in what shape the Nord Stream 1 machinery would be returned after maintenance. According to Reuters, Ursula von der Leyen, president of the European Commission, said on Wednesday that a total suspension of Russian gas was a viable possibility. It should be highlighted that concerns over gas prices may have caused the International Monetary Fund (IMF) to decrease its growth forecasts for Germany. Because of this, the IMF projected Germany's growth to be 1.2 percent in 2002 and 0.8 percent in 2023. In a previous forecast, the IMF predicted that the German economy would grow by 2% per year. Along with the IMF, the Asian Development Bank (ADB) has lowered its forecast for growth in developing Asia from 5.2 percent to 4.6 percent for 2022.

 

Political worries in Italy also foreshadowed further misery for the EU and the markets. Consequently, Prime Minister Mario Draghi received a vote of confidence; but, because the vote was boycotted by the three major cotillion parties, Mr. Draghi may resign and call for early elections.

 

Wall Street ended the day with smaller gains in line with the mood, as the US 10-year Treasury yield halted rising after a two-day rise at about 3.03 percent. As a result, as of the time of publication, intraday S&P 500 Futures were down 0.25 percent at 3,952.

 

Moving forward, DXY traders can find some fun in the US Weekly Jobless Claims and July Philadelphia Fed Manufacturing Survey. However, as markets expect a greater rate hike than the 0.25 percent increase proposed the day before, the ECB's decision will draw a lot of attention. Therefore, in order to prevent the US currency from continuing its current recovery, ECB officials must not only announce the 25 basis point rate increase but also take further steps to win back the confidence of Euro bulls.


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