The US Dollar Index (DXY) seeks to refresh its intraday low near 104.10 as it falls from the highest level since June 01, established the previous day, amid cautious optimism in the market. However, China’s stimulus joins the US’s worry ahead of this week’s top-tier inflation and jobs statistics to support the Greenback’s retreat moves against the six major currencies. However, Fed Chair Jerome Powell’s hawkish words and a technical breakout kept the DXY bulls optimistic.
Powell, the Fed’s chairman, restated his support for “higher for longer” interest rates, claiming that the policy is restrictive but that the Fed does not know what the neutral rate level is. The policymaker also stated that there remains a significant amount of ground to cover before returning to price stability, and that economic uncertainty necessitates nimble monetary policy-making.
Furthermore, Loretta J. Mester, President of the Federal Reserve Bank of Cleveland, looked hawkish, suggesting that undertightening would be worse than overtightening. The policymaker also stated, “We are getting close to where we need to be with rates.”
Furthermore, Federal Reserve Bank of Philadelphia President Patrick Harker told Bloomberg that he doesn’t see the need for additional rate hikes right now, but that if inflation continues to fall, he may call for more.
The weaker prints of the US Purchasing Managers Index and the Michigan Consumer Sentiment Index contrasted with ambiguous details of Durable Goods Orders, mid-tier activity data, and inflation forecasts. However, hawkish remarks from Federal Reserve (Fed) Chairman Jerome Powell at the annual Jackson Hole Symposium aided the US Dollar Index (DXY) in posting its sixth straight weekly rise and breaking beyond the three-month high.
On a different note, China’s lowering of the stock trade stamp duty adds to prospects of no major negatives from the US-China trade talks, while China Premier Xi Jinping’s distaste for Western-style growth policies appears to bolster sentiment recovery and weigh on the DXY.
Among these bets, the benchmark 10-year Treasury bond yields halted a four-week advance by showing slight weekly losses as it fell from its highest level since 2007, before rebounding to 4.25% at the latest. It should be noted that Wall Street closed higher the day before, but the S&P500 Futures are struggling to find a clear direction.
Following that, the Federal Reserve’s (Fed) preferred inflation indicator, the Core Personal Consumption Expenditure (PCE) Price Index for July, as well as monthly employment statistics, will be critical for determining the direction of the US Dollar Index.
Despite the recent decline from a nearly three-month high, bulls of the US Dollar Index (DXY) remain optimistic unless they see a daily closure below the prior resistance line stretched from early March, which was close to 103.30 at the time of publication.
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