US dollar index hovers high as market eyes inflation data and Fed rate outlook.

On Monday (November 11th),Foreign exchange trading MT4 the US dollar index remained strong in the Asian market, trading around 104.97, close to the four-month high of 105.45 reached last week. Investors are awaiting US inflation data and speeches by several Federal Reserve officials this week, which are expected to provide important guidance for future monetary policy and interest rate paths.

Although the US bond market was closed for the holiday, stock and futures markets continued trading normally. The US dollar rose slightly against the yen to 153.05, as concerns over possible Japanese intervention in the forex market caused the yen to retreat from last week’s high of 154.70.

The US Consumer Price Index (CPI) will be released this Wednesday, with the core CPI for October expected to show a monthly increase similar to the previous month. If the data comes in higher than expected, it will further reduce the possibility of the Federal Reserve adopting an accommodative policy in December. Additionally, Thursday's Producer Price Index (PPI) and Friday's retail sales data will reveal the latest trends in consumer demand. Although the Fed views the overall inflation trend as positive, analysts suggest the process of slowing it down may be challenging.

Speeches from several Federal Reserve officials will provide important insights into interest rates and economic outlook. If inflation data is higher than expected, the room for future rate cuts by the Fed may be limited. Even if rate cuts occur, they are expected to be moderate. Federal funds rate futures indicate that investors expect rates to drop from the current range of 4.5%-4.75% to about 3.7% by the end of 2025, which is 100 basis points higher than previously anticipated.

For the Australian and New Zealand dollars, there was a slight rebound in the Asian market on Monday, but the upward potential for commodity currencies may be limited due to slowing demand in Asian economies. Data shows that CPI growth and PPI declines in major Asian economies in October both point to weak demand, with support for the Australian dollar against the US dollar at 0.6550-55 and resistance at 0.6625-30.

In Europe, the euro rebounded to around 1.0727 after opening lower against the US dollar. Uncertainty in the German political scene and potentially delayed elections exert pressure on the euro, with technical indicators showing negative momentum, and support levels around 1.0667 and 1.0601.

The pound traded around 1.2921 against the US dollar. Analysts say the Bank of England is more focused on long-term price pressures than short-term budget impacts. Technical analysis shows that the pound is testing support levels at 1.2877 and 1.2835, with resistance near last week's high of 1.3046.

As the policies of the new US administration become clearer, analysts expect its tariff policies to potentially drive inflation and increase pressure on US Treasury yields, limiting the Fed's space for accommodative measures. The market is already digesting these expectations, and investors will closely watch the release of policy details, anticipating possible fluctuations in the dollar and global markets.

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