US dollar slips after consumer confidence data, Fed bet dovish

Vaseline3 weeks ago

0 3 minutes read

US dollar slips after consumer confidence data, Fed bet dovish

DXY gave up some ground and fell to 100.60.
The Conference Board’s consumer confidence data for September missed expectations.
Fed speakers are struggling with current market expectations.

The U.S. dollar index ( DXY ), which measures the USD against a basket of six currencies, posted some losses on Tuesday after the release of data from the Conference Board on consumer confidence. Meanwhile, Federal Reserve (Fed) officials appear to be trying to fend off aggressive market bets.

The US economy is showing mixed signals, indicating both a slowdown and continued resilience. Economic activity appears to be moderating, but some sectors remain strong. The Fed has indicated that the path of its monetary policy will be guided by evolving economic data, suggesting that the pace of rate adjustments will depend on incoming information.

Daily Market Reasons: US Dollar Falls After CB Consumer Confidence Surprise, Fed Speakers

US consumer confidence unexpectedly fell in September, falling below expectations to 98.7.
The market anticipates excessive Fed easing, pricing in 75 bps cuts by the end of the year and 175-200 bps next year.
Some Fed officials, including Neel Kashkari of the Federal Reserve Bank of Minneapolis and Michelle Bowman, are pushing back on favorable market expectations.
Bowman balked at the recent 50 bps rate cut, preferring a 25 bps cut and warning that a bigger cut could hamper the fight against inflation.
She highlighted ongoing inflation risks, including supply chain disruptions and fiscal policy, and remains cautious about the strength of the labor market.
Other Fed officials, such as Raphael Bostic of the Federal Reserve Bank of Atlanta and Austan Goolsbee of the Federal Reserve Bank of Chicago, are expressing concern about the labor market and calling for faster rate cuts.
Markets continue to bet heavily on 75 bps of easing this year.
On the positive side for the USD, global growth divergence favors the US Dollar, the Eurozone, Australia and China showing signs of weakness.
The benchmark US 10-year yield has retreated from September highs, currently trading at 3.75%.

DXY Technical Outlook: DXY Has Bearish Momentum, Bulls Struggle

Technical analysis for the DXY index reveals a bearish trend, supported by the relative strength index (RSI) around 40 and the moving average convergence divergence (MACD) pattern with descending green bars. With the index below the 20,100 and 200-day simple moving averages (SMA), the technical outlook remains clearly bearish. A break above the 20-day SMA would improve the outlook somewhat

Support levels exist at 100.50, 100.30 and 100.00, while resistance levels are at 101.00, 101.30 and 101.60.

US Dollar FAQ

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 found in circulation alongside local banknotes. It is the world’s most heavily traded currency, accounting for more than 88% of total global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, as of 2022. After World War II world, the USD has taken over from the British pound as the world’s reserve currency. For most of its history, the US dollar was backed by gold, until the Bretton Woods Agreement in 1971, when the gold standard disappeared.

The most important factor influencing the value of the US dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to ensure price stability (inflation control) and to promote full employment. Its main tool for achieving these two objectives is the adjustment of interest rates. When prices rise too fast and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the value of the USD. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which affects interest rates.

In extreme situations, the Federal Reserve can also print more dollars and engage in quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (for fear of default). It is a last resort when simply lowering interest rates is unlikely to achieve the desired result. It was the Fed’s preferred weapon to combat the credit crunch that occurred during the Great Financial Crisis of 2008. This involves the Fed printing more dollars and using them to buy US government bonds, mainly from financial institutions . QE usually leads to a weaker US dollar.

Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal of maturing bonds it holds in new purchases. It is usually positive for the US dollar.

Vaseline3 weeks ago

0 3 minutes read

Daily Market Reasons: US Dollar Falls After CB Consumer Confidence Surprise, Fed Speakers

DXY Technical Outlook: DXY Has Bearish Momentum, Bulls Struggle

US Dollar FAQ

Vaseline

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