The US dollar index (DXY), which evaluates the dollar’s strength against six major currencies, has shown weakness for three sessions in a row, hovering around 96.80 during Tuesday’s Asian trading hours. Traders are likely to keep an eye on the US retail sales figures that will be released later in the North American session.
The dollar is facing some obstacles after Chinese regulators requested financial institutions to reduce their U.S. Treasury holdings. This move is aimed at mitigating concentration risk and concerns over uncertain US economic policies, stirring fears that the appetite for dollar-denominated assets overseas might decline.
Pressure is mounting on the dollar as a recovering risk sentiment—due to an upcoming busy week for US economic data—dampens its demand. Presently, the market anticipates that interest rates will remain unchanged in March, with a potential rate cut on the horizon in June and another expected in September.
In the US, inflation expectations have dipped, with the median forecast for the next year now at 3.1%, down from 3.4% in December and marking a six-month low. Meanwhile, food price forecasts have remained steady at 5.7%, along with three- and five-year outlooks stuck at around 3%.
Traders are also looking forward to delayed January job figures and consumer price index (CPI) data set to be released later this week. These are expected to provide more clarity on the economic slowdown and influence perceptions regarding when the Federal Reserve might ease policies.
Federal Reserve President Stephen Millan stated on Monday that the central bank should strive for complete independence from political influences but cautioned that achieving absolute independence is “impossible.”
