US Dollar gained ground as higher inflation could refrain the Fed from reducing interest rates in March.
Investors turned towards the Greenback as US yields rose to multi-week highs.
Investors are now factoring in the possibility of a rate cut by the Fed in June.
The US Dollar Index (DXY), a measure of the US Dollar's strength against a basket of six major currencies, holds firm near three-month highs, trading around 104.80 during the Asian session on Wednesday. Concurrently, US yields are reaching multi-week highs across the yield curve.
There has been a significant shift in market sentiment, with expectations for an unchanged interest rate next month skyrocketing to 93%, marking a sharp contrast to just a month ago. Investors are now factoring in the possibility of a rate cut by the Federal Reserve (Fed) in June.
The unexpected upside surprise in US inflation for January has prompted analysts at Commerzbank to reassess the possibility of a pivot towards interest rate cuts by the Federal Reserve. There's speculation among observers about whether the previously planned Fed’s interest rate cut for May could now face uncertainty
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