US Dollar Index Hits 103.00 Level Amidst Fed Rate Cut Speculations
The US Dollar Index (DXY) has been on an upward trajectory, climbing to the 103.00 level for the first time since August, indicating strength in the Greenback.
Key Points:
- Short-term yields in the US money market remained steady, while mid- and long-term yields showed a robust recovery.
- DXY tested 103.00 level, supported by a resilient US economy and expectations of a 25 basis point rate cut in November.
- The Dollar’s price action suggests solid support at 100.00 psychological level, with a target of 103.75.
Safe-haven Demand Boosts Dollar Amidst Market Volatility
The Dollar’s momentum was further fueled by global risk aversion following geopolitical tensions, leading to heightened safe-haven demand.
Insights:
- Global market volatility increased, with the VIX index rising above 23, supporting the Dollar’s strength.
- Risk-sensitive assets felt the pressure as demand for safer assets surged.
Expectations of a 25 Basis Point Rate Cut in November
Market focus has shifted to the US economy’s performance post the September rate cut, with the majority of Fed officials leaning towards a quarter percentage point reduction next month.
Key Insights:
- Fed Chair Jerome Powell indicated room for further rate cuts to support economic growth.
- Various Fed officials expressed differing views on future rate cuts based on economic conditions.
- Higher-than-expected US Consumer Price Index for September increased the probability of a 25 basis point rate cut in November.
Global Interest Rate Trends and Central Bank Actions
Central banks worldwide are facing deflationary pressures, with different monetary policies to combat economic challenges.
Notable Actions:
- ECB executed a second interest rate cut and might consider further reductions.
- SNB, BoE, RBA, and BoJ maintained their policies with potential changes in the future.
Impact of US Election on Financial Markets
The upcoming US election could influence economic policies, with potential implications for Federal Reserve rate decisions.
Scenarios:
- A Trump win might accelerate rate cuts due to potential tariff reimplementation.
- A Harris Administration could advocate for accommodative monetary policy in case of an economic slowdown.
Next Week’s Focus: Economic Data and Fed Speeches
Key data releases and Fed official speeches will drive market sentiment next week, with retail sales and jobless claims in the spotlight.
Technical Analysis on US Dollar Index:
- Resistance at 200-day SMA at 103.75, with support at YTD low of 100.15.
- Potential upside target at 104.79 with RSI indicating room for further gains.