- The US dollar again suffers profit taking after the release of durable goods.
- Markets are becoming clueless in pricing the Fed's interest rate cut.
- The US Dollar Index is trading below 106.00 and seems unable to break above that level.
He US dollar (USD) sees its recovery attempt cut short after the publication of the durable goods data. Although the actual numbers were quite good and surpassed the survey numbers, the downward revisions caused some relaxation in the US Dollar and therefore the US Dollar Index (DXY). With no further data or catalysts on the calendar to drive a new DXY rally, the recovery attempt above 106.00 will come to a halt this Wednesday.
In terms of economic data, traders will begin to keep an eye on Meta's big tech gains after the US markets close. On Thursday, the publication of the US Gross Domestic Product and the segments of the downward break will be the main element of market movement. In the medium term, the weekly unemployment figures in the US will be interesting in the coming weeks, as several companies have reported layoffs during this earnings quarter.
Daily Summary of Market Movements: Reviews Never Go Down Well
- The Central Bank of Indonesia has raised its official interest rate from 6.00% to 6.25%, while markets expected a maintenance or a rate cut.
- Chinese construction conglomerate Country Garden has extended all of its yuan bonds to avoid a local default.
- The US Senate has approved a $95 billion aid package for Ukraine, Israel and Taiwan.
- USD/JPY rises again to 155.00, marking a new multi-decade high. Bank of America has warned in a report released Wednesday that intervention in the foreign exchange market could be near.
- The weekly mortgage loan applications index stood at -2.7%, down from a 3.3% increase last week.
- Preliminary durable goods data for March has been published:
- Core orders grew by 2.6%, although the previous 1.3% fell to 0.7%.
- Orders without transportation, an indicator closely followed by the markets, went to 0.2%, from 0.3% cut to just 0.1%.
- The US Treasury turns to the markets to assign a 5-year Note.
- Stocks rise on US durable goods release and downward revisions. The Nasdaq even jumps 1% ahead of Meta's gains at the close of trading this Wednesday.
- CME's Fedwatch tool suggests the Federal Reserve's policy rate will remain unchanged at 84.8% in June, while the probability of a rate cut in September is 46.7%, compared to 31.6%. there are no changes.
- US 10-year Treasury yields are trading around 4.65%, below this week's low, although not enough to strengthen the US dollar.
US Dollar Index Technical Analysis: GDP and PCE will be key
The recent rally in the US Dollar Index (DXY) is largely due to the amazing US economy, which has continued to release positive economic numbers. Tuesday's PMI numbers came in below estimates for the first time since last year, but investors seem to take that as a one-off. Markets will want to wait for confirmation of data this week and possibly next week before re-pricing a rate cut in June.
To the upside, 105.88 (a pivotal level since March 2023) must first be reclaimed before heading to the April 16 high at 106.52. Further up and above the round level of 107.00, the DXY index could find resistance at 107.35, the October 3 high.
On the downside, 105.12 and 104.60 should also provide support ahead of the 55-day and 200-day SMA at 104.35 and 104.05, respectively. If these two averages are not able to stop the price decline, the 100-day SMA near 103.70 is the next best candidate.
Inflation FAQ
What is Inflation?
Inflation measures the rise in prices of a representative basket of goods and services. General inflation is usually expressed as a month-on-month and year-on-year percentage change. Core inflation excludes more volatile items, such as food and fuel, which can fluctuate due to geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the target level of central banks, which are mandated to keep inflation at a manageable level, typically around 2%.
What is the Consumer Price Index (CPI)?
The Consumer Price Index (CPI) measures the variation in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage of inter-monthly and inter-annual variation. Core CPI is the target of central banks as it excludes food and fuel volatility. When the underlying CPI 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.
What is the impact of inflation on currency exchange?
Although it may seem counterintuitive, high inflation in a country drives up the value of its currency and vice versa in the case of lower inflation. This is because the central bank will typically raise interest rates to combat higher inflation, attracting more global capital inflows from investors looking for a lucrative place to park their money.
How does inflation influence the price of Gold?
Gold was once the go-to asset for investors during times of high inflation because it preserved its value, and while investors often continue to purchase gold for its safe haven properties during times of extreme market turmoil, this is not the case. most of the time. This is because when inflation is high, central banks raise interest rates to combat it.
Higher interest rates are negative for Gold because they increase the opportunity cost of holding Gold versus an interest-bearing asset or placing money in a cash deposit account. On the contrary, lower inflation tends to be positive for Gold, as it reduces interest rates, making the shiny 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.
