The US Dollar remains steady, potentially marking its sixth consecutive day of gains

• The US Dollar surged in early Friday trading, extending its rally for a sixth consecutive session.
• The Greenback gained momentum following the European Central Bank’s rate cut on Thursday, China’s commitment to monetary easing, and stronger-than-expected US producer inflation data.
• The US Dollar Index (DXY) climbed above 107.00, its highest level since November 26.

The US Dollar (USD) extended its winning streak on Friday, with the DXY Index climbing above 107.00 for the first time in over two weeks. This upward momentum was fuelled by persistent inflationary pressures in the US and the anticipation of further monetary policy easing by two major US trading partners, China and the Eurozone.

On Thursday, the USD received a boost following the release of November’s Producer Price Index (PPI) data, which significantly exceeded expectations. Although the data did not alter the prevailing view that the US Federal Reserve (Fed) will reduce interest rates by 25 basis points next week, it did temper expectations for additional rate cuts in 2025.

The Greenback also benefited from anticipated stimulus measures abroad. In Europe, European Central Bank (ECB) President Christine Lagarde acknowledged that a 50-basis point rate cut had been considered. However, the Governing Council ultimately deemed a 25-basis point reduction more suitable.

Recent developments in China indicate plans for stronger economic support in 2025. The Politburo, chaired by President Xi Jinping, has pledged to adopt a “moderately loose” monetary policy alongside a “more proactive” fiscal approach. In reaction to this announcement, bond prices surged, and China’s 10-year bond yields dropped to a historic low of 1.77%.

Meanwhile, the US economic calendar remains relatively quiet on Friday, featuring only the Import and Export Price Index. Market participants are expected to remain cautious, focusing on next week’s Federal Reserve meeting.