USD Index Corrects Lower to 105.30, Awaits Data

The USD Index (DXY), measuring the greenback against its major counterparts, experiences a slight retreat, trading around the 105.30 level at the week’s end. This decline comes after three consecutive daily gains that followed Thursday’s peak in the 105.40/45 range.

The subdued risk appetite across global markets puts pressure on the US dollar. European markets open with caution, still digesting the outcomes of the recent ECB meeting. Additionally, US yields, which rose on Thursday, are poised to continue their advance.

Market sentiment surrounding the Federal Reserve’s upcoming actions is undergoing a shift. Bets on a 25 basis point rate hike in November are waning, while speculation about interest rate cuts in the second quarter of the next year gains traction.

On the economic calendar, the US is set to release data on Export/Import Prices, followed by reports on Industrial/Manufacturing Production, Capacity Utilization, and the preliminary figures for Consumer Sentiment for the current month.

Key Points for the USD:

– The USD Index maintains its upward bias, with potential to revisit the 2023 peak near 105.90, recorded on March 8.

– The US dollar continues to find support from the robust US economy. However, the Federal Reserve’s commitment to a tighter monetary policy appears somewhat diminished, given ongoing disinflation and signs of a cooling labor market.

Key Events in the US This Week:

– Industrial Production

– Advanced Michigan Consumer Sentiment (Friday)

Ongoing Concerns:

– The debate persists regarding whether the US economy will experience a soft or hard landing.

– Emerging speculation about potential rate cuts in early 2024.

– Ongoing geopolitical tensions involving Russia and China.

In summary, the USD Index retraces slightly to 105.30 as it awaits a batch of economic data. The dollar’s outlook remains influenced by evolving economic conditions and changing expectations regarding Federal Reserve policy.