- The US IPC inflation cooled to 2.3% in April, below expectations, increasing speculation about Fed features.
- Trump promotes tax cuts and investment agreements, but details about commercial pacts remain lazy.
- The DXY falls below 101.60 while the tariff truce with China lacks clarity forward.
- The markets await the first rate cut of the Fed for September 2025 with a relief through 2026.
The US dollar index (DXY), which measures the value of the US dollar in front of a foreign exchange basket, lost ground on Tuesday, falling to 101.50 since April inflation data were softer than expected. While the CPI rose 0.2% monthly and 2.3% per year, failing in the forecasts, the underlying inflation remained stable at 2.8%.
The operators remain cautious in the midst of vague commercial commitments with China and the United Kingdom, and there are new uncertainties after President Trump promoted investment plans and ambitious prosecutors without detailing how they would impact the economy. Despite the headlines about the tariff tariff, the effective tariff rate qualified by Fitch on Chinese goods remains above 40%, feeding doubts about the durability of the recent agreement.
Summary of market movements: IPC figures and commercial policies in the care center
- The inflation of the CPI in the US was slowed to 2.3% per year in April, failing 2.4% expected, and the underlying CPC remained at 2.8% year -on -year.
- Trump states that China has reduced tariffs, but Fitch says that effective rates remain above 40% after inherited policies.
- The markets question the substance of the recent trade agreements with China and the United Kingdom, since the details remain scarce.
- President Trump promotes a tax cut bill of 4 billion dollars focused on high -income taxpayers, while low -income taxes could increase.
- Trump says that new “investment agreements” with companies such as Amazon and Oracle will boost growth, but does not provide a framework.
- Goolsbee of the Fed warns that tariffs can still feed inflation, but recent data does not confirm those fears.
- USA and China have agreed to a 90 -day tariff truce with US -reduced US tariffs and 10%.
- Those responsible for the Fed maintain a cautious tone since the CPI is maintained within acceptable ranges, delaying a possible monetary relief.
- Rate markets show a 91.6% probability that there are no changes in the Fed meeting of June 18 and 65.1% in July.
- September has a 51.6% probability of a 25 basic points cut, with long-term projections that point to 3.25% -3.50% by the end of 2026.
- Risk assets remain mixed; Gold is flat after recent setbacks, while oil and actions are with a cautious offer.
- Trump hints conversations with Iran and outlines the intention of enforcing the embargo on oil exports if diplomacy fails.
- The comments of the president of the FED, Powell, are expected, later in the week to obtain guidance on the management of the policy.
- The EUR/USD continues under pressure about 1,1060 with resistance in 1,1322 and support at the 1.1000 level.
Technical analysis of the US dollar index: Rate gap problems persist
The US dollar index exhibits a bearish signal, currently quoting about 101.00 after a slight daily decrease. The price action is located near the lower end of the intradic range between 101.19 and 101.76. The relative force index (RSI) and the ultimate oscillator remain in the 50s, suggesting a neutral impulse.
The indicator of convergence/divergence of mobile socks (MacD) shows a modest purchase signal, but this is counteracted by the RESPER RELATIVE RELATIVE FORCE INDEX (RSI stock), which is extended in the 90s, indicating overcompra conditions. In addition, the Momentum indicator of 10 periods about 2.00 reinforces the short -term sales pressure.
In the front of mobile socks, the simple mobile average (SMA) continues to point up, hinting at short -term optimism. However, the 50 -day exponential mobile average (EMA), the 50 -day SMA, the 100 -day SMA and the 200 -day SMA – all grouped near level 100 – indicate a broader bearish trend. The key support levels are identified in 100.94, 100.73 and 100.63, while resistance levels are recorded in 101.42, 101.94 and 101.98.
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.
