**Rewritten Article Based on Original by Robert Bogdanov, via Mitrade.com:**
**Forex Market Update: US Dollar Retreats Amid Shifting Rate Expectations and Global Uncertainty**
The US Dollar (USD) began to decline across several major currency pairs, marking a significant shift following the latest macroeconomic data and evolving central bank expectations. After months of robust performance driven by strong US economic indicators and Federal Reserve (Fed) rate hike forecasts, the greenback has started to show vulnerabilities.
This article provides an in-depth look at the current forex market trends, particularly focusing on USD depreciation, market reactions, central bank updates, and key technical levels for major currency pairs.
Credit to original reporting by Robert Bogdanov via Mitrade News.
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**Key Market Highlights:**
– The US Dollar Index (DXY) dropped from recent highs around 106.00 to below 105.70 following the release of more moderate inflation data.
– Dovish comments from Federal Reserve officials triggered a reassessment of longer-term rate expectations.
– The Japanese Yen (JPY) tested 2022 lows against the Dollar before staging a slight recovery, as traders speculated about potential Bank of Japan (BoJ) intervention.
– The Euro (EUR) and British Pound (GBP) gained strength amid weakening USD momentum and regional central bank cues.
– Geopolitical and economic uncertainties have further driven volatility across global forex markets.
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**US Dollar Loses Traction Post CPI Report**
Recent US Consumer Price Index (CPI) data has played a significant role in the US Dollar’s retreat. Although inflation remains elevated, markets interpreted the latest CPI numbers as a sign that price pressures could be stabilizing. This interpretation has led to reevaluation of how many more rate hikes the Fed might implement in the coming months.
– September’s CPI report showed annual inflation slightly above target but below previous expectations.
– Core inflation, closely watched by the Fed, showed signs of cooling.
– Market participants revised their projections for potential Fed tightening, with many seeing the current rate cycle nearing an end.
This softer inflation report paved the way for a pullback in US Treasury yields, particularly the 10-year benchmark, which dropped below the psychologically important 4.60% threshold. Lower yields typically dampen demand for the Dollar, which had previously benefited from a rising rate premium relative to other currencies.
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**Federal Reserve Officials Signal Pause in Rate Hikes**
The tone from recent Federal Reserve speeches suggests more caution about over-tightening policy. Several Fed members expressed concern over overtightening financial conditions, especially amid softening inflation and the lagging impact of prior hikes.
Remarks from key Fed officials:
– Philip Jefferson (Vice Chair): “We are monitoring the cumulative impact of previous rate increases. With current data, caution is warranted.”
– Raphael Bostic (Atlanta Fed): “We are likely near the peak of the interest rate cycle if the current disinflation trend continues.”
– Lorie Logan (Dallas Fed): Highlighted concerns over slowing labor market and a need to evaluate overall credit conditions carefully.
These comments contributed to lower expectations for any further Fed rate hikes in 2024, which in turn led to reduced demand for the US Dollar.
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**Japanese Yen at Critical Levels Amid BoJ Speculation**
The Japanese Yen weakened to near 150.00 per Dollar, a level last seen in 2022 when the BoJ intervened to support the Yen. Although no intervention has occurred so far in 2024, the Ministry of Finance and Bank of Japan are closely watching speculative moves and sharp depreciation.
Factors impacting JPY:
– The interest rate differential continues to favor USD over JPY amid ultra-loose BoJ monetary policy.
– BoJ Governor Kazuo Ueda hinted at a gradual shift toward normalization but ruled out immediate policy tightening.
– Traders remain wary of sudden government action should USD/JPY breach 150.00 decisively.
Support and resistance levels for USD/JPY:
– Major resistance:
Read more on EUR/USD trading.