- The dollar tries to continue with the start of recovery on Friday.
- The shares are falling between 3% and 5% on average worldwide, with the Hang Seng even down 13%.
- The US dollar index is quoted by about 103.00 and still experiences a technical rejection.
The American dollar index (DXY), which tracks the performance of the US dollar (USD) compared to six main currencies, establishes Friday’s recovery around 103.00 at the time of writing on Monday, after an initial downward movement. The markets were selling the US dollar again while shares, yields and precious metals fell. The concern arises after US President Donald Trump said during the weekend that he will remain in his tariff plan, while the financier and billionaire Bill Ackman warned the president who is losing the confidence of business leaders.
In the economic front, all eyes will be placed in the consumer price index (CPI) of the US this week. The March inflation indicator will be the first publication where some impact of the Trump administration could already be expected. In several weekly summaries issued on social networks, the White House proclaims that Trump has reduced prices of all food products, such as eggs or gasoline in the gas station. This can be seen and verified with the next IPC publication on Thursday.
Daily summary of market movements: some small auctions
- At 15:30 GMT, the US Treasury will launch a 3 months and another 6 months bonus.
- The Founder and Executive Director (CEO) of Pershing Square Capital Management, William Albert Ackman, asked President Trump on the social media platform X to pause the current commercial tariffs to first negotiate a commercial agreement. ACKMAN warns that Trump is losing the confidence of business leaders, reports Reuters. ACKMAN is considered one of its most significant financial taxpayers in both mandates.
- Red numbers not seen for a long time in shares markets, with the Hang Seng Chino closing at -13%, European indices facing average falls of more than 6%, and US futures trying to save the situation by correcting only around 3%.
- The CME Fedwatch tool sees the possibilities of an interest rate cut by the Federal Reserve (Fed) in May in 46.2%, rising from 33.3% on Friday as betting bets for feat cuts increase. For June, a stable rate scenario is out of the options. Only rates cuts are being considered with a 53.5%probability that the policy rate will be reduced to the range of 3.75%-4.00%from the current 4.25%-4.50%.
- The yields of 10 years of the US are quoted around 3.98%, moving away from their new minimum of five months at 3.85%. The next minimum to be considered is 3.69%, last seen in early October 2024.
Technical analysis of the dollar index: even there
A firm technical rejection was developed in the DXY index at the beginning of the week early Monday. Friday’s recovery could not cross the pivotal level of 103.18. Unfortunately, that is where recovery was stopped, which means that 103.18 is a level that the bassists of the US dollar are defending strongly.
The first level to take into account is, therefore, 103.18, which remained support during March and triggered a technical rejection on Friday. Above there, the round level of 104.00 and the simple mobile average (SMA) of 200 days in 104.87 come into play.
At the bottom, 101.90 is the first line of defense and should be able to trigger a rebound, since it has been able to stay in the last two days of negotiation. Maybe not on Monday, but in the next few days, a break below 101.90 could see a decrease towards 100.00.
US dollar index: daily graphics
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 values in portfolio that expire 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.
