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US Dollar Index Fell after the Fed’s Take on Inflation above 2%

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May. 24 2018, Updated 9:30 a.m. ET

US Dollar Index

After a brief pullback on Tuesday, the US Dollar Index regained strength on Wednesday and surged to five-month high price levels. The US Dollar Index opened Thursday on a mixed note and traded with weakness in the early hours.

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Market sentiment

The US Dollar Index moved higher on Thursday ahead of the release of the Fed’s meeting minutes amid expectations of a hawkish tone. However, the Fed’s dovish tone despite inflation above the 2% target weakened the US dollar’s upward momentum on Wednesday. The US dollar declined after President Trump opened a national security investigation on car and truck imports, which could lead to US auto tariffs. The US dollar maintained the weakness early on Thursday amid concerns about US auto tariffs. The US dollar traded below opening prices. The market is looking forward to the release of initial jobless claims data. The data are scheduled to be released at 8:30 AM EST today.

At 5:50 AM EST on May 24, the US Dollar Index was trading at 93.73—a drop of 0.29%.

US Treasury yields

US Treasury yields declined on Wednesday. The ten-year yield closed below 3% following the Fed’s meeting minutes. The yields moved lower as amid signals that the Fed is comfortable with inflation above 2% and temporarily letting it move past the 2% mark. The Treasury yields are trading with a weak sentiment in the early hours.

Below are the movements in Treasury yields as of 5:50 AM EST on May 24.

  • The ten-year Treasury yield was trading at 3.008—a rise of ~0.17%.
  • The 30-year Treasury yield was trading at 3.169—a fall of ~0.06%.
  • The five-year Treasury yield was trading at 2.836—a rise of ~0.11%.
  • The two-year Treasury yield was trading at 2.528—a fall of ~0.02%.

The iShares 20+ Year Treasury Bond (TLT) gained 0.73%, while the ProShares UltraShort 20+ Year Treasury (TBT) and the ProShares UltraPro Short 20+ Year Treasury (TTT) declined 1.4% and 2.2%, respectively, on Wednesday.

Next, we’ll discuss how commodities performed in the early hours on May 24.

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