US Dollar falls flat, possible sixth straight trading day with gains

LONDON (December 13) The US Dollar (USD) extends its winning streak on Friday, with the DXY Index trading above 107.00 for the first time in more than two weeks, driven by signs of lingering inflation pressures in the US and prospects of further monetary policy easing in two of the US main trading partners: China and the Eurozone.

The USD got a boost on Thursday after Producer Price Index (PPI) data for November came well above expectations. While the data failed to change the broader view that the US Federal Reserve (Fed) will cut interest rates by 25 basis points next week, it did pare some bets of further cuts in 2025. 

The Greenback was also supported by expectations of further stimulus elsewhere. In Europe, the European Central Bank (ECB) President Christine Lagarde admitted that a 50 basis point rate cut scenario was on the table. However, the Governing Council agreed that a 25 basis point rate cut was more appropriate. 

In China, recent news also signaled bolder economic support in 2025. The Politburo, led by President Xi Jinping, vowed to embrace a “moderately loose” monetary policy in 2025 and a “more proactive” fiscal policy. In response, bond prices have soared and China’s 10-year bond yields fell to a record low of 1.77%, Bloomberg reports.   

The US economic calendar is light on Friday, with only the Import and Export Price Index at hand. Traders will likely  keep their powder dry and look ahead to the US Federal Reserve meeting next week. 

Daily digest market movers: Outside help

• China's top leaders and policymakers are considering allowing the yuan to weaken in 2025, Reuters reports. Several analysts are seeing the risk that China is heading towards a Japan scenario, where bond yields could fall further, Bloomberg reports. 
• At 13:30 GMT, the Import-Export Price Index for November is due. The monthly Export Index is expected to contract by 0.2% after expanding in October by 0.8%. The Import Index is expected to shrink by 0.2% against the 0.3% increase in October. 
• Equities are very geographically divided this Friday. In Asia, all major Chinese and Japanese indices are in red territory. Meanwhile, in Europe and in the US, the major indices are seeing green numbers. 
• The CME FedWatch Tool is pricing in another 25 basis points (bps) rate cut by the Fed at the December 18 meeting by 96.4%. 
• The US 10-year benchmark rate trades at 4.32%, a fresh high for this week.

FXStreet