- The US dollar quotes green against most of its main peers, with a large increase against the Turkish lyre.
- The operators evaluate the impact of the next decision of the Federal Reserve.
- The US dollar index is still trapped between 103.00 and 104.00 for now.
The American dollar index (DXY), which tracks the performance of the US dollar (USD) compared to six main currencies, rises and recovers above 103.50 at the time of writing on Wednesday, since the US dollar (USD) is strengthened against most of the main currencies. The increase in the US dollar occurs after a strong rebound of more than 5% in the USD against the Turkish lyre (Try) after the owners arose that the authorities arrested the mayor of Istanbul, Ekrem Imamoglu, the main political rival of President Tayyip Erdogan, for positions that include corruption and support for a terrorist group.
In the economic data front, it is a very quiet day in the prelude to the decision of interest rates of the Federal Reserve (FED) later in the day. The Federal Open Market Committee (FOMC) is ready to announce its decision on the policy rate and publish the update of the Summary of Economic Projections (SEP). After the meeting, the president of the Fed, Jerome Powell, will comment at a press conference. With Trump’s policy as a backdrop, the markets will want to know how many, if there are, feat cuts have planned the members of the Fed by 2025 and beyond.
What moves the market today: the silence of the Fed could be deafening
- At 18:00 GMT, the FED will publish its decision on the interest rate and its statement of monetary policy, together with the summary of economic projections.
- The policy rate is expected to remain unchanged in the range of 4.25%-4.50%.
- In addition, interest rate projections in the SEP update could suggest how many features the Fed expects for 2025 and 2026.
- At 18:30 GMT, the president of the FED, Jerome Powell, will give a statement and answer questions at a press conference.
- The actions show signs of a feeling of risk, with American and future American indexes quoting green, although less than 0.50% on average.
- According to the CME Fedwatch tool, the probability that interest rates are lower than current levels in May is currently 16.8%, compared to 21.5% on Tuesday. For June, the chances that indebtedness costs are lower are 62.6%.
- The 10 -year performance of the USA trades around 4.28%, far from its minimum of almost five months of 4.10% registered on March 4.
Technical analysis of the dollar index: it will not be easy
The American dollar index (DXY) endured another firm pressure at its lower support level about 103.18 on Tuesday. The fact that support can prevent DXY from reaching a new minimum of six months suggests that markets are waiting for more clarity about tariffs, the US economy, inflation and geopolitics. The DXY is at a crossroads where, once the level of 103.18 is broken, it could not return for a long time now that several banks are beginning to call a greater devaluation of the US dollar in the coming years, according to Bloomberg.
A return to 104.00 would mean that the DXY simply remains loyal to its March range. If bulls can avoid a technical rejection there, look for a great sprint towards the round level of 105.00, with the simple mobile average (SMA) of 200 days converging at that point and reinforcing this area as a strong resistance. Once that area is broken, a series of key levels, such as 105.53 and 105.89, will be presented as limits.
In the lower part, the round level of 103.00 could be considered an bearish objective in case the US yields fall after the communication of the Fed later on Wednesday, with even 101.90 not being unthinkable if the markets capitulate even more in their long -term US dollar holdings.
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 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.
