Atlanta Fed President cautious on rate cuts, GDP growth revised to 3% in Q2
Atlanta Fed President Raphael Bostic is cautious about rate cuts and prefers to see more data before easing. Revised GDP growth of 3% in Q2 highlights the resilience of the US economy. Jobless claims came in better than expected, showing positive signs for the labor market.
The US Dollar, measured by the US Dollar Index (DXY), saw further gains above 101.00 on Thursday. The 10-year US yield holds above 3.8%, supporting the Greenback. US stock index futures trade mixed following Nvidia earnings, which could impact risk appetite and the US Dollar’s demand as a safe-haven currency. On the data front, Gross Domestic Product (GDP) revisions highlight US economic resilience.
The US economy remains robust, exceeding expectations. However, market sentiment appears overly optimistic, with expectations of aggressive monetary easing.
Market movers: US Dollar extends gains after GDP revisions
- Atlanta Fed President Bostic cautious on rate cuts, cites robust labor market conditions and elevated inflation.
- About 100 bps of easing anticipated by year-end.
- Odds of a 50-basis-point cut in September within 30-35% range.
- Bureau of Economic Analysis revises Q2 annualized real GDP growth upwards to 3%.
- New unemployment insurance claims in the US declined slightly to 231K for the week ending August 23.
DXY technical outlook: Index indicates potential recovery, resistance at 101.50
Indicators suggest a potential recovery for the DXY, with the Relative Strength Index (RSI) trending upward and the Moving Average Convergence Divergence (MACD) indicator printing lower red bars. A consolidation above the 101.00 support level could trigger a rally. Key supports include 100.50, 100.30, and 100.00, while resistances are located at 101.50, 101.80, and 102.00.
Understanding the Federal Reserve and its impact on the US Dollar
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed adjusts interest rates to achieve price stability and foster full employment. When inflation is above the Fed’s 2% target, it raises interest rates, strengthening the US Dollar. Lowering interest rates encourages borrowing, weighing on the Greenback. The Federal Reserve holds policy meetings to assess economic conditions and make monetary policy decisions. In extreme situations, the Fed may resort to Quantitative Easing (QE) to increase credit flow in the financial system, weakening the US Dollar.