- The US dollar remains quite flat before the publication of the US CPI on Wednesday.
- All eyes are again in the president of the Fed, Jerome Powell, who goes to his second day in Capitol Hill.
- The DXY dollar index is quoted laterally around 108.00, still looking for address.
The DXY dollar index, which tracks the performance of the US dollar (USD) compared to six main currencies around 108.00 after the president of the Federal Reserve (Fed), Jerome Powell, kept their cards near the chest when He faced legislators on Tuesday in Capitol Hill. Powell did not leave many clues about another cut of interest rates on the part of the Central Bank, if there is. The operators are reflecting on what to do next, with the US yields starting slowly but for sure this week.
The economic calendar shows that the January Consumer Price Index (CPI) will be published on Wednesday. The expectations are not very large, with the expected monthly IPC that rises 0.3% compared to 0.4% of December. The underlying indicator of the monthly CPC is expected to increase 0.3%, coming from 0.2% of the previous month. Meanwhile, the president of the Fed, Jerome Powell, will give a speech for the second consecutive day in Capitol Hill.
What moves the market today: Powell 2.0
- At 13:30 GMT, the US consumption price index will be published for January:
- The general measure of the monthly CPC is expected to rise 0.3%, coming from 0.4% of the previous month.
- The underlying indicator of monthly inflation is expected to increase 0.3%, compared to 0.2% in December.
- Stronger inflation numbers would boost higher rates in the US and, in turn, unleashed a stronger US dollar (USD)
- At 15:00 GMT, the president of the FED, Jerome Powell, will begin his second day of testimony in Capitol Hill.
- At 5:00 p.m., the president of the Atlanta Federal Reserve Bank, Raphael W. Bostic, will comment on the Atlanta chapter of the National Association of Corporate Directors.
- At 22:05 GMT, the governor of the Federal Reserve, Christopher Waller, will speak in “A Very Stable Conference: Stablecoin Infrastructure for Real World Applications” in San Francisco, California.
- The actions face some winds against after the first day of the testimony of the president of the Fed, Powell. In addition to the German Dax reaching a new historical maximum, in general, most indexes are quoting with small profits or losses.
- The CME Fedwatch tool projects a 95.5% probability that the Fed maintain interest rates without changes in its next meeting on March 19.
- The 10 -year bonus of US bonus quotes around 4.54%, rising even more for the third consecutive day and recovering even more from its new annual minimum of 4.40% registered last week.
Technical analysis of the DXY dollar index: no clues
The DXY dollar index is caught in a clue game, and the detective president of the Fed, Powell, is not giving many clues. With the operators without clues about what or when the next movement will make the Fed, slowly but safely, the bonds are again a safe place for operators in periods of uncertainty. With this, the US dollar should see some tickets and climb slowly but safely.
Up, the first barrier in 109.30 (Maximum of July 14, 2022) was briefly overcome but did not stay last week. Once that level is recovered, the next level to reach before progress is still 110.79 (maximum of September 7, 2022).
Downward, 107.35 (Maximum of October 3, 2023) continues to act as a strong support after several tests last week. In case it occurs more downward, look for 106.52 (maximum of April 16, 2024), 106.21 (single mobile average of 100 days), or even 105.89 (resistance in June 2024) as better support levels.
Dollar index: daily graphic
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.
