- The dollar index receives support since US PMI data could report growth in May business activity.
- The Rules Committee of the US House of Representatives approved the broad Trump tax cuts project and scheduled a vote in the Plenary Session of the Chamber in a few hours.
- Fed officials pointed out that a decrease in consumers’ confidence and companies are attributed to changes in US commercial policy.
The US dollar index (DXY), which tracks the US dollar (USD) compared to a basket of six main currencies, maintains profits after registering losses in the previous three sessions. During the first European hours on Thursday, the DXY remains around 99.70, slightly above the minimum of two weeks.
In addition, the operators expect the data managers index (PMI) of the US S&P global that will be published on Thursday. It is expected that general business activity will expand at a constant pace in May, which could provide some support to the dollar.
The Chamber Rules Committee approved the broad tax cuts project of US President Donald Trump. The US Chamber Rules Committee declared that a vote in the camera’s plenary session on Trump’s tax cuts project is scheduled to be carried out in a few hours. The project was supported by the Committee with an 8-4 vote after a long 22-hour session on Wednesday. Republican leaders established two votes to start the debate and approve the project before Thursday dawn, according to Reuters.
The president of the Fed of Cleveland, Beth Hammack, and the president of the Fed of San Francisco, Mary C. Daly, expressed increasing concerns about the US economy during a panel event organized by the Bank of the Federal Reserve of Atlanta. Although the important economic indicators remain solid, both officials pointed out a decrease in consumers and companies and partially attributed the change of opinion to US commercial policies.
Moody’s degraded the US credit qualification from AAA1 after similar degradations by Fitch Ratings in 2023 and Standard & Poor’s in 2011. Moody’s now projects that the federal debt of the US will reach around 134% of GDP by 2035, compared to 98% in 2023, with the budget deficit that is expected to be expected Expand almost 9% of GDP. This deterioration is attributed to the increase in debt service costs, the expansion of rights programs and the fall in tax revenues.
US dollar FAQS
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation along with local tickets. According to data from 2022, it is the most negotiated currency in the world, with more than 88% of all global currency change operations, which is equivalent to an average of 6.6 billion dollars in daily transactions. After World War II, the USD took over the pound sterling as a world reserve currency.
The most important individual factor that influences the value of the US dollar is monetary policy, which is determined by the Federal Reserve (FED). The Fed has two mandates: to achieve price stability (control inflation) and promote full employment. Its main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% objective set by the Fed, it rises the types, which favors the price of the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and promulgate quantitative flexibility (QE). The QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is an unconventional policy measure that is used when the credit has been exhausted because banks do not lend each other (for fear of the default of the counterparts). It is the last resort when it is unlikely that a simple decrease in interest rates will achieve the necessary result. It was the weapon chosen by the Fed to combat the contraction of the credit that occurred during the great financial crisis of 2008. It is that the Fed prints more dollars and uses them to buy bonds of the US government, mainly of financial institutions. Which usually leads to a weakening of the US dollar.
The quantitative hardening (QT) is the reverse process for which the Federal Reserve stops buying bonds from financial institutions and does not reinvote the capital of the wallet values that overcome in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
