US Dollar Index probes session lows near 98.00
|- DXY remains depressed and closer to 98.00.
- The Philly Fed Index surprised to the upside in March.
- Weekly Claims rose by 214K in the week to March 12.
The greenback remains unable to ignite even the smallest of rebounds and drops to daily/weekly lows around the 98.00 mark when gauged by the US Dollar Index (DXY).
US Dollar Index under pressure on risk-on mood
The index is seen extending its leg lower to five-session lows on Thursday and poking the 98.00 mark in a context still favourable to riskier assets, which are in turn propped up by hopes of an end to the Russian invasion of Ukraine.
Further selling pressure in the buck also comes from the corrective downside along the curve of US yields, following the post-FOMC highs recorded on Wednesday.
Auspicious results from the US data space did not help the dollar either, after Initial Claims rose by 214K in the week to March 12 and the Philly Fed Index improved to 27.4 in March. Further data saw Housing Starts expand 6.8% MoM in February, or 1.769M units, and Building Permits contract 1.9% MoM, or 1.859M units. Additionally, Industrial Production expanded 0.5% MoM in February and 7.5% from a year earlier and Capacity Utilization eased a tad to 77.6%.
What to look for around USD
The index corrects further south following the start of the tightening cycle by the Federal Reserve at its meeting on Wednesday. Hopeful news from the geopolitical landscape could be weighing on the buck along with the better tone in the risk-associated complex, all putting DXY under extra pressure. Looking at the broader picture, bouts of risk aversion – exclusively emanating from Ukraine - should prop up inflows into safe havens and lend legs to the dollar at a time when its constructive outlook remains propped up by the current elevated inflation narrative, the Fed’s lift off and the solid performance of the US economy.
Key events in the US this week: Industrial Production (Thursday) – CB Leading Index, Existing Home Sales (Friday).
Eminent issues on the back boiler: Escalating geopolitical effervescence vs. Russia and China. Fed’s rate path this year. US-China trade conflict. Futures of Biden’s Build Back Better plan.
US Dollar Index relevant levels
Now, the index is losing 0.28% at 98.12 but a break above 99.29 (high Mar 14) would open the door to 99.41 (2022 high Mar 7) and finally 99.97 (high May 25 2020). On the flip side, the next down barrier emerges at 98.06 (weekly low Mar 17) followed by 97.71 (weekly low Mar 10) and then 97.44 (monthly high Jan 28).
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