Key points:
The U.S. dollar index (USDX) is holding near a 6-1/2-month high, trading at 105.98 after reaching a high of 106.006 earlier today.
This level underscores ongoing strength in the dollar as markets digest the potential impacts of “Trump trades” and upcoming U.S. inflation data.
Following President-elect Donald Trump’s recent election victory, traders have been pricing in an economic agenda that includes lower taxes and possible tariffs, which are expected to stoke inflationary pressures.
This expectation has pushed up U.S. Treasury yields, with markets increasingly sceptical of aggressive rate cuts by the Federal Reserve under the Trump administration.
Picture: The USD Index is testing resistance at 106.00 with bullish momentum, supported by rising moving averages and a positive MACD trend, as seen on the VT Markets app.
Trump’s recent statements about making the U.S. the “crypto capital of the planet” have fuelled optimism around digital assets, positioning Bitcoin as a potential hedge against inflation in a highly uncertain economic landscape.
The cryptocurrency’s recent run-up reflects this sentiment, but traders are now waiting to see how upcoming U.S. economic data, including today’s inflation report, may impact the broader market environment.
See also: Dollar Rises Ahead of Fed Speakers
Wednesday’s Consumer Price Index (CPI) report for October is expected to show a 0.3% increase in core inflation. Any reading above this level could further reduce the likelihood of a December rate cut by the Fed.
For now, the dollar’s stability near its multi-month high is matched by Bitcoin’s resilience near record levels, reflecting traders’ cautious stance amid high inflation expectations and a potentially crypto-friendly U.S. administration.
The interplay between traditional and digital assets will be closely watched as key data releases unfold, with the potential for significant market moves depending on the inflation data and Fed commentary expected in the coming days.
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