- The DXY stagnates around 103.95 while the feeling of the market is still fragile.
- The operators are attentive to the US CPI data on Wednesday for a new market management.
- The Nasdaq falls 3.3%, dragging the largest actions down.
The US dollar (USD) is still under pressure on Monday, with the DXY around 103.95, struggling to find traction after the strong fall of last week. The latest statements of the President of the Federal Reserve (FED), Jerome Powell, on Friday, reassured markets by indicating that the Central Bank does not see an urgent need to adjust the policy at this time, although economic uncertainties are growing. Meanwhile, the Nasdaq faces strong losses in the market, falling 3.3%, since investors remain cautious about the key inflation data in the United States (USA) that will be published in the middle of the week.
What moves the market today: the Fed in the focus while the CPI approaches
- Market participants prepare for the publication of the February Consumer Price Index (CPI) on Wednesday, which is expected to provide key information on inflation trends.
- The Federal Reserve enters its blackout period before the March 19 meeting, limiting the comments of the Central Bank during the week.
- The president of the FED, Jerome Powell, reiterated on Friday that the Fed remains patient and does not see an urgent need to act, preferring to wait for additional economic data before making changes in politics.
- US actions face acute correction, with Nasdaq leading losses, falling 3.3%.
- The CME Fedwatch tool indicates a majority expectation that rates will remain at the current levels in May, while the expectations of rate cuts in June have increased significantly.
- Before the media blackout period, the Fed feeling index in the daily chart has fallen to a neutral land, which could also explain the fall of the USD.
Technical perspective of the DXY: testing about 103.50
The American dollar index (DXY) is stabilized below 104.00, consolidating after the strong fall of last week. Simple mobile socks (SMA) of 20 and 100 days confirmed a bearish crossing about 107.00, reinforcing the negative trend. The relative force index (RSI) remains close to the over -sales territory, pointing out a potential for a short -term rebound. Meanwhile, the convergence/divergence of mobile socks (MACD) remains bassist, suggesting a higher downward risk unless buyers intervene near support levels. If the DXY fails to recover 104.50, the following support is seen about 103.30, which could determine if there is a deeper fall.
FAQS inflation
Inflation measures the rise in prices of a representative basket of goods and services. General inflation is often expressed as an intermennsual and interannual percentage variation. The underlying inflation excludes more volatile elements, such as food and fuel, which can fluctuate due to geopolitical and seasonal factors. The underlying inflation is the figure on which economists focus and is the objective level of central banks, which have the mandate of maintaining inflation at a manageable level, usually around 2%.
The consumer price index (CPI) measures the variation in the prices of a basket of goods and services over a period of time. It is usually expressed as an intermennsual and interannual variation. The underlying IPC is the objective of the central banks, since it excludes the volatility of food and fuels. When the underlying IPC exceeds 2%, interest rates usually rise, and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually translates into a stronger currency. The opposite occurs when inflation falls.
Although it may seem contrary to intuition, high inflation in a country highlights the value of its currency and vice versa in the case of lower inflation. This is because the Central Bank will normally raise interest rates to combat the greatest inflation, which attracts more world capital tickets of investors looking for a lucrative place to park their money.
Formerly, gold was the asset that investors resorted to high inflation because it preserved their value, and although investors often continue to buy gold due to their refuge properties in times of extreme agitation in the markets, this is not the case most of the time. This is because when inflation is high, central banks upload interest rates to combat it. Higher interest rates are negative for gold because they increase the opportunity cost to keep gold in front of an asset that earns interest or place money in a cash deposit account. On the contrary, lower inflation tends to be positive for gold, since it reduces interest rates, making bright metal a more viable investment alternative.
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.
