Dollar rose in European trade on Monday against a basket of major rivals, holding ground above two-week lows hit earlier in the Asian session.

The gains came as US 10-year treasury yields rally as well, as prospects of early Fed rate cuts this year fade.

The Index

The dollar index rose 0.1% to 104.18, with a two-week low at 103.90, after closing down 0.1% on Friday, the third loss in four days on profit-taking off three-month highs at 104.60. 

US Yields 

US 10-year treasury yields rose 0.3% on Monday, extending gains for the fourth straight session and almost hitting three-week highs at 4.195%, boosting dollar demand. 

Yields added 15 basis points last week as investors push out the likely data of the first Fed rate cut this year following strong US data and bullish remarks by Fed officials. 

Several Fed officials, including Fed Chair Jerome Powell, said they need to see more evidence of sustainably lower inflation before cutting rates. 

 US Rates

Current pricing for a 0.25% Fed interest rate cut in March stands at just 15%, while odds for such a cut in May stood at 60%. 

Inflation Data

Now traders await important US inflation data tomorrow for January to gauge the likely path ahead for US monetary policies. 

Global oil companies are cooperating now with biofuel producers in a united front against EV cars, according to an interesting Bloomberg article published this week, which notes the rapid increase in EV cars, in turn threatening two industries that were usually at odds with each other.

What’s happening now is that both industries are uniting against Federal policies that aim to promote EV cars as the only alternative for the future, no matter the cost. 

According to Bloomberg, the American Petroleum Institute joined the National Corn Growers Association and several other industrial groups to support a Republican proposal in the Congress that imposes the sale of gasoline mixed with higher parts of ethanol throughout the year. 

Only during the cold months that E15 fuel is usually sold, while E10, with fewer ethanol parts, is sold usually in the summer, amid concerns about smoky fog resulting from E15 if sold in summer. 

Usually, oil companies oppose the selling of higher ethanol-fuel as it means less gasoline in the tank and less sales, however they now took a radically different position under pressure from EV sales. 

Traditional oil and fuel companies are now actively collaborating with biofuel companies, especially those depending on corn, in a united front against mass electrification of the automotive industry.

Last year, EV automotive sales hit a record 7% of total sales in the US in 2023, however sales are expected to slow down this year. 

The demand for gasoline isn’t expected to collapse anytime soon as the appeal for traditional means of transportation remains strong, pushing major oil companies to agreement with major corn-based biofuel companies. 

Amazingly, even in Norway, the current with the highest rate of EV car ownership in the world, fuel demand remains stable. 

Why are Oil Companies Concerned? 

They’re mainly concerned about the growing pressure from Washington and the hand of the government moving against their industry. 

EV car ownership has so far only displaced 1.5 million bpd of daily global oil sales, which remains a tiny percentage, as EV cars are still a more expensive choice with less appealing infrastructure. 

Traditional industries alongside biofuel industries have sown doubt about President Joe Biden’s announced goal for turning half of all car sales in the US to EV by 2030, with several officials saying such a thing won’t happen unless people were actively forced to purchase EVs under threat of violence. 

US stock indices were mixed on Friday with Wall Street heading for weekly gains as the corporate earnings season nears its end.

So far, 319 companies listed in the S&P 500 index have reported their results, with 80.6% of them beating analysts’ expectations. 

On another front, Fed Chair Jerome Powell said in a Sunday interview that he expects only three Fed rate cuts this year, and he doesn’t expect a cut in March. 

Minneapolis Fed Chair Neil Kashkari warned today from cutting rates too quickly, as current tight conditions haven’t yet impacted all aspects of the US economy sufficiently. 

Investors expected six Fed rate cuts this year, and such optimistic forecasts sent US stocks sharply higher in recent weeks. 

On trading, Dow Jones slipped 0.4% as of 17:06 GMT, or 144 points to 38,581, while S&P 500 rose 0.2%, or 11 points to 5009, as NASDAQ added 0.8%, or 138 points to 15,931. 

Palladium prices fell on Friday as  the dollar edged down against most major rivals, while investors assess the likely path ahead for US policies. 

A series of stimulus measures launched by China last year to boost the real estate market failed to buoy the market sufficiently. 

A major reason is Chinese Banks’ doubts and refusal to lend new credit to the struggling sector.

On the other hand, consumer prices in China continued their slowdown in January for the fourth straight month, hinting at deflation. 

Official data showed consumer prices fell 0.8% in January  y/y after a 0.3% drop in December.

However, consumer prices did rise 0.3% m/m after a 0.1% increase in the previous month. 

Producer prices fell 2.5% y/y in January, after a 2.7% tumble in December. 

China’s economy grew by 5.2% in 2023, passing the official target of 5%, however the recovery seems shaky in the eyes of many investors. . 

On another front, Fed Chair Jerome Powell said in a Sunday interview that he expects only three Fed rate cuts this year, and he doesn’t expect a cut in March. 

Minneapolis Fed Chair Neil Kashkari warned today from cutting rates too quickly, as current tight conditions haven’t yet impacted all aspects of the US economy sufficiently. 

Investors expected six Fed rate cuts this year, and such optimistic forecasts sent US stocks sharply higher.

Otherwise, the dollar index stabilized at 104.1 as of 16:48 GMT, with a session-high at 104.2, and a low at 103.9. 

Palladium March futures fell 3.1% as of 16:50 GMT to $864.5 an ounce.