US Dollar Weakens Following Disappointing New York Manufacturing Data
- Fed officials remain cautious with Kashkari favoring modest rate cuts and Waller urging a slower pace.
- Markets are pricing high odds of 25 bps cuts in November and December.
The US economy is facing mixed signals, with certain sectors indicating a slowdown, while others remain robust. Despite this, the Federal Reserve (Fed) has signaled that its approach to easing monetary policy will be guided by emerging economic indicators.
The US Dollar Index (DXY), which measures the value of the USD against a basket of six currencies, struggles for traction, hovering above 103.00. A disappointing New York manufacturing report, indicating an unexpected contraction in October, has weighed on recent US Dollar momentum.
Market Movers: US Dollar Declines Amid Fed Caution and Mixed Data
- Fed officials Kashkari and Waller express caution, suggesting a more gradual pace of rate cuts than previously expected.
- Strong jobs and CPI data have tempered expectations of aggressive Fed easing, and 125 bps of total easing over the next 12 months.
- The New York Empire State Manufacturing Index for October was released, showing a significant decline into contraction at -11.9.
- On Thursday, markets will follow Retail Sales figures, which might shake the USD dynamics and Fed bets.
DXY Technical Outlook: Index Shows Bullish Momentum, Nears Resistance
Technical analysis for the DXY index suggests a positive outlook, with indicators gaining momentum. Support and resistance levels are as follows:
- Support: 103.00, 102.50, 102.30
- Resistance: 103.30, 103.50, 104.00
Inflation FAQs
What is Inflation?
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis.
What is the Consumer Price Index (CPI)?
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. Core CPI excludes volatile food and fuel inputs.
How Does Inflation Impact Currency Values?
High inflation in a country pushes up the value of its currency as central banks raise interest rates to combat it, attracting more global capital inflows.
What is the Relationship Between Inflation and Gold?
Higher inflation tends to be negative for Gold as it increases the opportunity cost of holding the metal compared to interest-bearing assets.