Dollar Extends Losses After Tariff Report, Soft PPI
A Bloomberg gauge of the dollar fell for the first session in six following a report that members of Donald Trump’s incoming economic team are discussing gradually ramping up tariffs. The greenback extended losses after the release of lower-than-expected wholesale inflation data.
The Bloomberg Dollar Spot Index falls 0.4% and trades near session low; earlier, pared losses into the NY open and ahead of December PPI figures.
Headline PPI final demand rose 0.2% month-over-month (0.4% increase expected); core PPI was 0.0% (0.3% gain forecast).
10-year Treasuries erase initial gains seen after PPI; yield rises 1bp to 4.79% while Fed swaps are little changed.
“2025 will be a story of two halves—USD strength in 1H, and a partial or full reversal in 2H,” Solita Marcelli, CIO Americas at UBS Global Wealth Management, wrote to clients Tuesday. “The USD currently trading close to multi-decade highs in strongly overvalued territory and elevated investor positioning underpin this narrative”.
Cable erases earlier losses in bid to snap longest losing run since mid-November; GBP/USD is little changed at 1.2195
The UK paid the highest yield in decades to sell 30-year inflation-linked debt.
Overnight volatility in sterling heads for its second-highest close in nearly two years ahead of CPI releases out of the UK and the US.
EUR/USD outperforms among G-10, rallies 0.6% to 1.0304 day’s high.
One-week volatility climbed on the tariffs report, up by as much as 142 basis points to 11.09%, the highest since Nov. 6.
Yen underperforms G-10 following comments from BOJ deputy governor Ryozo Himino, who said the bank will adjust policy if its economic outlook materializes.
USD/JPY gains 0.4% to 158.04, snaps three days of losses.
Danske Bank strategists including Kristoffer Kjær Lomholt recommend shorting USD/JPY as a tactical position (time frame one to three months): “Although negative carry is a headwind, we believe that expected near-term price movements justify the position within this shorter time frame, while the potential for extending the trade would depend on the evolving macro backdrop”.
Source : Bloomberg
