US Dollar dips as softer PPI data temper bullish momentum

• Traders exhibit caution following below-forecast US PPI figures that spark fresh inflation debates in global markets.
• President-elect Donald Trump's potential remarks on tariffs and trade policies keep investors vigilant, unsure of the Dollar's immediate trajectory.
• The Federal Reserve's steady rate stance for January remains likely, but any inflation surprises could sway policy expectations again.

The US Dollar Index, which measures the value of the USD against a basket of currencies, is on the backfoot after the December Producer Price Index (PPI) was released. Traders are on edge over possible comments from President-elect Donald Trump on the above headline. The US Dollar Index (DXY) dips below 110.00 and looks for support to bounce back.

Daily digest market movers: USD eases on hot NFP report momentum as PPI disappoints

• December's Producer Price Index (PPI) was softer than anticipated: core monthly PPI at 0.0% vs. 0.3% expected, headline at 0.2% vs. 0.3%, and yearly readings coming in below forecasts.
• The US Dollar weakened on this report, but analysts remain confident in the ongoing rally and view the tariff noise as short-lived.
• Inflation concerns persist, with sticky underlying price pressures suggesting the Federal Reserve (Fed) will retain its cautious easing pace into 2025.
• Yield softening sees the 10-year benchmark slip to around 4.80% from its 14-month high, reflecting market uncertainty post-PPI.
• CME FedWatch Tool shows that traders have already priced in the chance of unchanged rates at January's meeting, underscoring the Fed's data-dependent posture and potential Trump-driven volatility.

DXY technical outlook: Respite after softer data, but structure remains positive

The US Dollar Index witnessed a temporary dip below the 110.00 mark, pressured by profit-taking and underwhelming PPI numbers. Despite this pullback, the broader uptrend stays intact, hovering near multi-year highs. Indicators show a mild slowdown, hinting at a potential short-term consolidation phase. If profit-taking intensifies, the index may slip further, probably towards 107.00-108.00; however, strong fundamentals and robust Fed guidance suggest the Dollar could quickly find a bid, preserving its longer-term bullish bias.