US Dollar rallies to November highs, driven by hawkish Fed speakers

• Despite weak sentiment data, USD rides high on hawkish Fed bets.
• CPI data reported this week made hopes of a June cut unlikely.
• Fed’s Collins and Goolsbee were on the wires sounding hawkish.

The US Dollar Index (DXY) is trading above the 106.00 mark, attaining its highest level since early November. The Index's upward movement is largely driven by rising US yields and a hot inflation data environment that favors the US Dollar. In addition, Federal Reserve (Fed) officials expressed fewer possibilities for rate cuts this year, and an increase in hawkish bets is another driver boosting the currency. 

On Wednesday, inflation measured by the US Consumer Price Index (CPI) accelerated in March, which made US Treasury yields rally, and markets are now expecting a more aggressive Fed.

Daily digest market movers: DXY shrugs off weak sentiment data on the back of hawkish bets

• Early April saw a decrease in US Consumer Confidence as indicated by the University of Michigan's Consumer Sentiment Index, which fell to 77.9 from March's 79.3, shyer than anticipated.
• Decreases were recorded in Sentiment Indices for both Current Conditions and Consumer Expectations, falling to 79.3 and 77 from 82.5 and 77.4, respectively.
• On Wednesday, the Consumer Price Index (CPI), reported by the US Bureau of Labor Statistics, rose to 3.5% YoY in March, a jump from February's 3.2%. The core CPI also accelerated.
• Because of heightened inflation figures, there is increased anticipation of a hawkish response from the Fed, which has led to a rise in US Treasury bond yields, subsequently strengthening the US Dollar (USD).
• Susan Collins, from the Boston Fed, pointed out that only two rate cuts could happen this year. Austan Goolsbee also warned that the Fed might take action if Personal Consumption Expenditures accelerates.
• The Odds of a July cut are reportedly less than 60%, a decrease from the prior 99% chance before the inflation data were publicized. The odds for a second rate cut happening in December stand at 75%.
• The market's hopes for a June rate cut also declined to around 20%.

DXY technical analysis: DXY bullish as momentum indicators favor buyers, correction likely

The indicators on the daily chart reflect a favorable buying momentum. The Relative Strength Index (RSI), with its positive slope and placement in positive territory, suggests that bulls are gaining ground in the currency price action. However, the RSI stands now in overbought terrain, which may hint that a correction is incoming. 

Meanwhile, the Moving Average Convergence Divergence (MACD) also supports this bullish view as the green bars on the histogram show an upward trajectory, indicating that buyers are in control.