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US Dollar Index: DXY Bulls Eye 103.00 Based On Hawkish Fed Hints, China Difficulties, And Powell's Testimony
US Dollar Index rises marginally as it maintains a four-day winning stretch amidst a sluggish trading session. DXY is propelled by hawkish comments from Fed policymakers, optimistic US data, and concerns of US-China tension. The positioning of markets in anticipation of Fed Chair Powell's semi-annual testimony has recently energised US Dollar Index supporters. DXY investors require confirmation from Powell and Sino-American conflict to maintain control.
Despite recent inactivity around 102.60 early on Wednesday, the US Dollar Index (DXY) is up for the fourth consecutive day. In doing so, the dollar's index against the six major currencies reflects the market's anticipation of Federal Reserve (Fed) Chair Jerome Powell's semi-annual Testimony in the hopes of witnessing further gains in the DXY, particularly when Fed policymakers support higher interest rates and sentiment remains uncertain.
Nevertheless, the news that US Vice President Joe Biden labelled Chinese President Xi Jinping a dictator on Tuesday propels the DXY bulls close to the intraday high. U.S. Secretary of State Antony Blinken's visit to Beijing did not result in any significant positive developments for US-China relations, as indicated by these remarks. The same should provide vendors of Gold with optimism.
It should be noted that the People's Bank of China (PBoC) first reduction in the two key lending rates (namely the Loan Prime Rate (LPR) and Medium-term Landing Facility (MLF) rate) for the first time in nearly a year drives the risk-averse sentiment and the demand for the U.S. dollar as a safe haven.
Fed Governor and Vice Chair Nominee Philip Jefferson stated, in reference to the central bank's signals, "I remain focused on returning it to our 2% target." In the same vein, Federal Reserve Governor Lisa Cook stated on Wednesday before the Senate, "I am committed to promoting sustained economic growth in the context of low and stable inflation." According to prepared statements for Wednesday's Testimony, Fed Board nominee Adriana Kugler also stated that returning inflation to the central bank's 2% target is essential for establishing a solid foundation for the US economy.
In addition, US Housing Starts soared to their highest level since April 2022 by increasing 21.7% MoM in May, compared to -2.9% (revised from +2.2%) in April and -0.8% market expectations, which favours the DXY investors. In a similar vein, Building Permits were also positive for the month in question, rising 5.2% MoM compared to -5.0% expected and -1.4% prior readings (revised from -1.5%).
Wall Street's benchmark began the week on a negative note, but S&P500 Futures are currently inactive, whereas US Treasury bond yields snapped a two-day winning trend the day prior before posting early-day inactivity.
A mild calendar ahead of Fed Chair Jerome Powell's semi-annual Testimony may present difficulties for US Dollar Index (DXY) traders. Should Fed Chair Powell defend the US central bank's hawkish stance, the DXY may continue to track higher.
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