Today’s markets analysis on behalf of Konstantinos Chrysikos Head of Customer Relationship Management at Kudotrade
31st January 2025
The U.S. dollar remained relatively steady and could see some volatility as traders react to today’s U.S. inflation data release and potential US tariff developments. The PCE data could provide some hints on where the Federal Reserve’s monetary policy could be going, following its recent decision to keep interest rates unchanged. Core PCE is projected to rise slightly by 0.2%, but stronger-than-expected results could skew expectations towards a less dovish Fed, potentially supporting the dollar. Conversely, softer inflation data would likely reinforce market predictions for more rate cuts this year, placing downward pressure on the currency. Market participants are now pricing two rate cuts for this year.
Meanwhile, U.S. Treasury yields rose, with the 10-year US Treasury yield holding above the 4.5% threshold. Yields are expected to react significantly to today’s inflation report, as traders readjust their expectations for future rates. Additionally, the Trump administration’s deadline for imposing tariffs on Canada and Mexico is approaching. The aftermath could affect the market’s direction next week. Should the tariffs materialize, safe-haven demand for the dollar could rise.