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As Fed Chief Powell's Testimony And The US NFP Approach, The Us Dollar Index Nurses Its Wounds Below 105.00
After breaking a four-week decline, the US Dollar Index records modest loses. Concerns about the Fed raising rates further and the potential for a policy shift hurt DXY. US Treasury bond rates fluctuate after hitting a new multi-day high, and stock forecasts report modest losses in the face of caution. Anxiety ahead of the major triggers combines news about China to dampen the mood and test US Dollar bears.
US Dollar Index (DXY) consolidates the largest weekly loss in seven around 104.55-60 at the start of the crucial week encompassing Federal Reserve (Fed) Chairman Jerome Powell’s half-yearly Testimony and the US jobs report for February. As a result, the index of the dollar against the six most important currencies encourages some risk aversion during a slow Asian session.
However, news from China's National People's Congress (NPC) annual session seems to have recently weighed on the risk profile as the dragon nation anticipates moderate growth of 5.0% for the current year, compared to market forecasts of 6.0%. After reporting the weakest annual Economic growth in decades, global worries were also raised and had an impact on mood and NZD / USD values. Outgoing China Premier Li Keqiang said, "China should support the calm growth of cross-Strait ties and progress the process of China's "peaceful reunion," but also take firm measures to oppose Taiwan independence."
It’s worth mentioning that softer prints of US statistics and mixed Fed discussions dragged on the DXY the prior week.
The US ISM Services PMI for February was 55.1, compared to 54.5 market estimates and 55.2 market predictions. The inflation component of the PMI survey, the Price Paid sub-index, moved lower to 65.6 in February from 67.8 but exceeded experts' expectation of 64.5. The New Orders sub-index climbed to 62.6 from 60.4 and the Employment Index improved to 54 from 50 in the same time. Prior to that week, the Conference Board's (CB) Consumer Sentiment survey and the US Durable Goods Purchases for January both showed easing trends.
Raphael Bostic, president of the Federal Reserve Bank of Atlanta, raised fresh doubts about the Fed's policy change, stating that "the central bank could be in a position to halt the present tightening cycle by mid to late summer." On the contrary, San Francisco Federal Reserve Bank President Mary Daly said during the weekend that if data on inflation and the labor market continues to come in hotter than expected, interest rates will need to go higher, and stay there longer, than Fed policymakers projected in December, as reported by Reuters. It should be noted that the US Federal Reserve stated unequivocally in its semi-annual Monetary Policy Report that "Ongoing increases in the Fed funds rate goal are essential." According to the article, the Fed is steadfastly dedicated to bringing inflation back to 2%.
In light of this, the yield on US 10-year Treasury bonds increased to its greatest point since November 2022 before declining as recently as 3.95%. However, S&P 500 Futures posted slight losses by the time of press, while Wall Street ended with profits.
Moving on, the statement of Fed Chair Powell, statistics on inflation in China, and reports from the China National People's Congress can all provide short-term guidance for the US Dollar Index. Following that, the US employment data for February will be important for DXY traders. Should the current losing streak of the US data persist, supported by Powell’s cautious comments, the US Dollar may record more losses.
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