Stretched US dollar bullishness looks appetizing, but data risks loom

Show notes

The bond selloff continues. The global bond selloff is fueled by concerns over soaring debt levels leading to political turmoil and uncertainty in developed economies. This is compounded by major central banks' struggles to bring inflation down to their 2% target, amid various economic, political and geopolitical developments that could trigger a reversal in consumer prices worldwide. Consequently, the yields are rising and the expectations of further rate cuts from some major central banks are melting putting equities under pressure.
Markets’ sensitivity to major economic data will likely rise as policy uncertainties mount and appetite weakens. Due today, the US will release its latest PPI numbers, and the headline PPI may have risen from 3% to 3.4% in December and core PPI is seen rising from 3.4% to 3.7% during the same month. Rising price pressures are not good news for the Federal Reserve (Fed) doves. Stronger-than-expected inflation figures could further accelerate the US treasury selloff and support the US dollar. Yet the dollar rally appears to be approaching stretched levels, which could encourage contrarians to return to the market.
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