- DXY tracks firmer yields to begin the key week but refrains from further advances.
- Market players stay divided over FOMC, March rate hike clues expected.
- Easing fears of Omicron battles escalating concerns over Russia-Ukraine tussles.
- US Markit PMIs can offer immediate direction, US Q4 GDP, PCE Inflation important too.
US Dollar Index (DXY) seesaws around 95.70 as traders brace for crucial week comprising Fed meeting amid early hours of Monday’s Asian session.
In doing so, the greenback gauge tracks firmer yields, although a bit slowly amid mixed concerns over the covid variant Omicron. In addition to the pre-Fed hawkish mood that propels the US Treasury yields of late, geopolitical fears surrounding Russia’s invasion of Ukraine and inflation fears also favor the US Treasury bond coupons.
That said, US 10-year Treasury yields rose 2.7 basis points (bps) to 1.774%, snapping a three-day decline, as traders anticipate hawkish Fed verdict, amid firmer inflation, during this week’s key meeting.
Expectations of the March rate hike signals from the Federal Open Market Committee (FOMC) take clues from the latest comments from US President Joe Biden and International Monetary Fund Managing Director Kristalina Georgieva. Both these key authorities highlighted inflation fears and praised Fed’s push for tighter monetary policies.
Elsewhere, the US State Department and UK Deputy Prime Minister Dominic Raab both flashed warnings over Russia’s preparations for invading Ukraine, which in turn magnified geopolitical fears.
On the positive side, the recently easing virus numbers from the UK, the US and China hint at easing Omicron fears even as Japan and India do struggle with the virus of late.
Additionally, People’s Bank of China’s (PBOC) efforts to keep the world’s second-largest economy fluid joins hopes of the US stimulus to favor the US stock futures despite firmer US T-bond yields, which in turn tests DXY bulls.
Ahead of Wednesday’s FOMC, Bank of America (BoA) expects the first rate hike to take place in March, with 25 by hikes in each of the next eight quarters. The BoA also said, “We now expect QT to be announced at the June FOMC meeting, with risks skewed earlier to the May FOMC meeting.”
Read: Fed Preview: Three ways Powell could out-dove markets, dealing a blow to the dollar
For now, monthly readings of Markit PMIs from the US will decorate today’s calendar. Given the upbeat expectations versus recently mixed US data, a slight miss by the scheduled PMIs may negatively affect the DXY. However, nothing becomes more important than Wednesday’s Fed meeting. Following that, the US Advances Q4 GDP and PCE Inflation data will also be watched for further clarity on the US central bank’s next move.
Technical analysis
US Dollar Index bulls need a clear upside break of a six-week-old resistance line and 50-DMA, around $96.00 by the press time, to retake controls. Until then, the odds of another pullback to 95.50 can’t be ruled out.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD continues its downward trend for the fourth consecutive day, driven by a stronger US Dollar influenced by the hawkish market sentiment surrounding the Federal Reserve and expectations of prolonged higher interest rates.
GBP/USD: The first downside target is seen at the 1.2600–1.2605 zone
GBP/USD trades on a weaker note around 1.2620 during the early European session on Friday. The decline of Pound Sterling is backed by the growing speculation that the Bank of England will begin the rate-cut cycle this year.
Gold ends Q1 2024 at record highs, what’s next?
Gold is sitting at an all-time high of $2,236, lacking a trading impetus amid holiday-thinned conditions on Good Friday. Most major world markets, including the United States are closed in observance of Holy Friday, leaving volatility around Gold price highly subdued.
Ripple's move above this key level could trigger nearly 50% rally for XRP
Ripple price has overcome a critical resistance level and flipped into a support floor on the weekly time frame. This development happened while XRP tightly consolidated for roughly 250 days.
US core PCE inflation set to ease in February on month as Federal Reserve rate cut bets for June mount
The core Personal Consumption Expenditures Price Index is set to rise 0.3% MoM and 2.8% YoY in February. The revised Summary of Projections showed that policymakers upwardly revised end-2024 core PCE forecast to 2.6% from 2.4%.