- The US Dollar recovers against most major peers in the G10 space on Thursday.
- US President Trump no longer targets the Fed, but rather the US 10-year yield.
- The US Dollar Index (DXY) pops above 108.00 with still a long road ahead to get back to 109.00
The US Dollar Index (DXY), which tracks the performance of the US Dollar against six major currencies, is locking in gains for this Thursday just ahead of the United States (US) trading session. The move comes after comments from US President Donald Trump revealing his intentions to take over Gaza and reach a nuclear deal with Iran. Besides that, a plan to end the war in Ukraine will probably be put on the table either this or next week by the Trump administration as well.
On the economic data front, comments from US Treasury Secretary Scott Bessent sparked some support in US yields. Bessent said that the Trump administration wants to bring down 10-year Treasury yields, not the Federal Reserve’s (Fed) benchmark short-term interest rate, Bloomberg reports. For this Thursday, the weekly US Jobless Claims are due, ahead of Friday’s Nonfarm Payrolls print.
Daily digest market movers: Again some softer data
- The Bank of England (BoE) has released its monetary policy decision. As expected a 25 basis point (bps) rate cut was applied to 4.50% from 4.75%. The vote split was 7 in favor for a 25 basis point rate cut against 2 votes for a 50 basis points rate cut.
- The US Challenger Job Cuts for January is ticking up further to already 49,795 layoffs with the previous number at 38,792.
- The US Jobless Claims are due for the week ending January 31.
- Initial Claims came in at 219,000, beating the 213,000 expectation and moving up from 207,000 last week.
- Continuing Claims are jumping to 1.886 millio, beating the 1.87 million headcount and above last week’s 1.858 million.
- At 19:30 GMT, Federal Reserve Governor Christopher Waller participates in a discussion on the future payments at the GeoEconomics Center, hosted by the Atlantic Council in Washington D.C.
- San Francisco Fed President Mary Daly is set to speak as well at 20:30 GMT.
- At 22:10 GMT, Dallas Fed President Lorie Logan speaks on a panel discussion titled “Future Challenges for Monetary Policy in the Americas” at an event in Mexico City.
- Equities are catching a breather on the back of the soothing comments from US President Donald Trump. Across the board, from China over Europe to US Futures, are in the green.
- The CME FedWatch tool projects an 85.5% chance of the Fed keeping interest rates unchanged in the next meeting on March 19.
- The US 10-year yield is trading around 4.42%, recovering from its fresh yearly low at 4.40% printed on Wednesday.
US Dollar Index Technical Analysis: Speed of light
The US Dollar Index (DXY) is finally breathing a sigh of relief, bouncing off from some technical levels in several major crosses against the US Dollar. Comments from US President Donald Trump and US Treasury Secretary Scott Bessent at least helped to trigger a slight turnaround in the DXY after its past three-day decline. Meanwhile, pressure will build up in the runup to the Nonfarm Payrolls report for January, which will be released on Friday.
On the upside, the first barrier at 109.30 (July 14, 2022, high and rising trendline) was briefly surpassed but did not hold on Monday. Once that level is reclaimed, the next level to hit before advancing further remains at 110.79 (September 7, 2022, high).
On the downside, the October 3, 2023, high at 107.35 has withstood the recent selling pressure. For now, that level still looks to be holding, though watch out for the Relative Strength Index (RSI), which still has some room for the downside. Hence, look for 106.52 (April 16, 2024, high) or even 105.90 (resistance in June 2024 and 100-day Simple Moving Average) as better support levels.
US Dollar Index: Daily Chart
Employment FAQs
Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.
The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.
The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.
Source: https://www.fxstreet.com/news/us-dollar-bounces-off-support-after-softening-stance-from-president-trump-202502061206