Last moment to weaken the US dollar?

There seems to be a very good mood in the financial markets, as evidenced by the increase in the S&P 500 above the round 5000 points or bitcoin price returning above USD 48000. Stock indices of emerging markets are also staying high, and this would not be surprising if it were not for the fact that at the same time the yield on 10-year US bonds is at the level of 4,17%, and the US dollar index recently reached the highest level since mid-November 2023

Historically, a weaker dollar has supported risky assets

Currently, the situation seems so interesting that the situation of risky assets is good with a relatively strong USD and high yields. This, in turn, may at this point indicate that the market is seeing solid macroeconomic data that supports the overall economy, so markets can likely be high while bond rates are higher. Nevertheless, there is a chance that the US dollar may still be under pressure. We're talking about the upcoming week and inflation data in the US.

Dollar exchange rate and inflation data from the USA

The dollar index fluctuated around 104 points. on Monday as investors await U.S. consumer inflation data due on Tuesday for clues on the potential trajectory for interest rate cuts. The dollar came under pressure on Friday as revised US data revealed a smaller increase in the CPI for December. According to the BLS, the CPI rose 0,2% month over month, slightly less than the initial report of 0,3%. However, the core CPI remained unchanged at 0,3%. These data confirmed the disinflation trend last year and strengthened the dovish attitude towards the Federal Reserve's monetary policy. Markets still see little chance of a rate cut Fed in March, but they estimate traffic in May. Investors also expect retail sales data on Thursday and manufacturer inflation data on Friday, and are waiting for comments from at least seven Fed officials this week.

Speculators accumulated short positions on the dollar?

As it appears from COT report published by the committee CFTC non-commercial investors, including: Hedge funds have been accumulating short positions in recent weeks amid a rising U.S. dollar. As of December 5, 2023, speculators had 8255 contracts for the decline in the value of USD, while on February 6, 2024, it was 16935 contracts. If speculators were right, because there is always a possibility of a short squeeze, this week could be decisive for the dollar. The data will be available on Tuesday at 14:30 p.m.