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US Dollar Index: Cautious Optimism And Fed Discussions Test DXY Investors Below 102.00 Ahead of US ISM PMI and NFP data
The US Dollar Index has difficulty defending purchasers after a two-week uptrend. Positive market sentiment began NFP week on the heels of positive China news. Kashkari of the Federal Reserve warns of a rise in unemployment, but is undecided about a September rate hike. As the FOMC failed to inspire policy advocates and emphasised data dependence, US data will be crucial.
Around 101.70, the US Dollar Index (DXY) remains directionless in Asia on Monday morning. As a result, the dollar's index versus the six main currencies bears the weight of the market's risk-on sentiment and mixed concerns regarding the Federal Reserve (Fed). The cautious mood ahead of this week's US ISM PMIs for July and the US employment report for the same month, including the headline Nonfarm Payrolls (NFP), is also testing the DXY bulls after a two-week uptrend.
The market's risk-taking disposition can be attributed to the recent softening of US inflation indicators and expectations of China stimulus. Nonetheless, Bloomberg cited China's State Council Information Office as expressing optimism for a fresh stimulus announcement from Beijing by announcing a surprise press conference at 7:00 AM GMT, citing a report of such an event. According to the news, China Vice Chairman of the National Development and Reform Commission Li Chunlin and officials from the Ministry of Industry and Information Technology, the Ministry of Commerce, and the State Administration of Market Regulation will hold a media conference to announce additional measures to increase consumption.
The US Federal Reserve's (Fed) preferred inflation gauge, namely the Core Personal Consumption Expenditure (PCE) Price Index, weakened to 4.1% YoY for June compared to 4.2% expected and 4.4% previously. Additional information revealed that Personal Income decreased to 0.3% from 0.5% expected and previous measurements, while Personal Spending increased to 0.5% from 0.4% expected and 0.1% previously. In addition, the final readings of the Michigan Consumer Sentiment Index for July decreased to 71.6 from the initial estimates of 72.6, and the University of Michigan's (UoM) 5-year Consumer Inflation Expectations decreased to 3.0% from 3.1% previously and as anticipated.
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, expressed concern about employment losses and sluggish growth while praising the inflation outlook in light of recent inflation data. The policymaker also criticised the central bank's aggressive campaign of monetary tightening to curb price increases.
Notable is that strong estimates of the US Gross Domestic Product (GDP) Annualised for the second quarter (Q2) joined the positive figures of the US Durable Goods Orders for June, allowing the US Dollar to remain stronger for a second consecutive week. The European Central Bank's (ECB) dovish hike and emphasis on the data-dependence of the next rate decision are also likely to have benefited the US dollar.
Wall Street closed with a gain, and yields and the U.S. dollar fell in tandem, reflecting the prevailing sentiment. In spite of this, the US Dollar Index (DXY) posted two consecutive weekly gains by the close of trading on Friday. Notable gains in the S&P500 Futures as of press time are noteworthy.
The US ISM PMIs and risk catalysts can provide DXY traders with entertainment ahead of Friday's July US employment report, which will be crucial to monitor for clear direction.
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