The US dollar recorded a strong decline during today's trading, coinciding with weak demand for the US currency amid some developments that had a negative impact on the dollar's movements in the markets, foremost of which were the negative economic data that enhanced fears of slowing the pace of US interest rate hikes. Below are the main influences on the dollar's movements in currency markets:

Slowing US inflation drags down the dollar index

The dollar clearly retreated, affected by the release of inflation data which showed a slowdown in inflation to its lowest pace in several months. The data indicated inflation growth of about 7.7% year-over-year by the end of last October, lower than market expectations of 7.9%. The previous reading of the index had recorded growth of 8.2% during last September, which had a negative impact on the dollar index.

Negative unemployment claims data increases pressure on dollar movements

In addition, the dollar fell sharply affected by the negative US unemployment claims data, which would place further constraints on the Federal Reserve before the next interest rate decision. The data from the US Labor Department showed an increase in US unemployment claims by more than market expectations this week, reaching about 225 thousand new claims, higher than the expectations that predicted 220 thousand claims. The previous reading recorded about 218 thousand claims last week.

Statements from Federal Reserve policymakers weigh heavily on the dollar

During trading, many statements were issued by policymakers within the Federal Reserve about the need to stop raising interest rates or at least slow the pace of hikes in the coming period, especially after the release of the inflation data. In this regard, Federal Reserve member Patrick Harker stated that the Fed is expected to raise the interest rate at a slower pace in its next meeting, as interest rates have reached sufficiently high levels. He clarified that it is better to stop at an interest rate of 4.50%, and that a 50 basis point rate hike would still be large. He added that this year will witness a decline in the core personal consumption expenditures index to 4.8%.

How was the US dollar index affected by these developments?

Amid these negative developments and weak demand for the dollar due to fears about slowing the pace of monetary tightening, the US dollar index dropped extremely strongly, settling below the 109-point level. It is currently trading near 108.26 points, a decrease of up to 2.27%, as markets await any new developments that may affect its trading.