The DXY Index showed a significant increase of 0.28% reaching 101.38, driven by recent developments in the financial market. DBS Senior FX Strategist Philip Wee provides insights into the factors influencing this rise.
One of the key factors contributing to the strengthening of the Greenback was the decline in the Euro (EUR) due to negative monthly inflation data from Germany in August. Additionally, robust US consumer spending led to an increase in the US Treasury 10Y yield by 2.7 bps to 3.86%.
The US Bureau of Economic Analysis also revised the 2Q24 GDP growth to an annualized 3.0% QoQ saar, surpassing the previous estimate of 2.8%. Personal consumption expenditure growth was also revised upwards to 2.9% from 2.3%.
As a result of these developments, EUR/USD experienced a depreciation of 0.4% to 1.1077. Market sentiment is now leaning towards a 25 bps rate cut at the European Central Bank meeting scheduled for September 12, while expectations for a 50 bps cut at the FOMC meeting on September 18 have diminished.
Analysis:
The recent movements in the DXY Index and EUR/USD exchange rate indicate a shift in market dynamics influenced by central bank policies and economic data. Investors should closely monitor the upcoming ECB and FOMC meetings to gauge potential impacts on currency markets and adjust their investment strategies accordingly.