The U.S. dollar index (DXY) rose 0.01% on Tuesday, recovering from a one-week low, driven by hawkish comments from Cleveland Fed President Beth Hammack and Dallas Fed President Lorie Logan. Hammack indicated the Fed might remain on hold for an extended period, while Logan emphasized that more interest rate cuts would require significant weakness in the labor market.
Key economic indicators revealed a weaker performance than anticipated, with the Q4 employment cost index increasing by only 0.7% quarter-on-quarter, falling short of the expected 0.8%, marking the smallest rise in 4.5 years. Additionally, December retail sales remained unchanged, underperforming an expected rise of 0.4%.
In international currency movements, the Chinese yuan reached a 2.5-year high against the dollar, putting further pressure on the U.S. currency. The swaps market indicates a 20% probability of a 25 basis point rate cut at the next Fed meeting on March 17-18.
