US Dollar Index recedes from weekly highs above 99.00

  • DXY leapt to fresh tops above the 99.0 handle.
  • EUR/USD weakness post-ECB lifted the index.
  • US Core CPI rose above estimates in August.

The Greenback has picked up extra pace today, pushing the US Dollar Index (DXY) to new weekly tops beyond 99.00 the figure.

US Dollar Index up on dovish ECB, data

The index clinched multi-day highs beyond the 99.00 mark in response to a much weaker EUR/USD following the dovish tone from the ECB at today’s event. In fact, the ECB reduced the deposit interest rate to -0.50%, announced another round of open-ended quantitative easing and a tiered deposit rate system. At the same time, the central bank revised lower its forecasts for GDP and inflation in the broader Euroland for the 2019/21 period.

Back to the US, inflation figures tracked by the headline CPI rose 0.1% inter-month in August and 1.7% over the last twelve months (vs. 1.8% estimated). Stripping food and energy costs, consumer prices surprised to the upside, gaining 0.3% MoM and 2.4% from a year earlier.

DXY lost some traction near 99.10, however, tracking the drop in yields of the US 10-year note to the vicinity of 1.66% after testing the 1.78% area during early trade.

What to look for around USD

The Greenback managed to regain some poise on the back of positive data and fresh optimism from the trade front. At his last speech, Chief Powell reiterated his pledge to support the current expansion, while market participants are still factoring in potential interest rate cuts in the next meetings and a probable recession at some point in 2020. However, the constructive view in DXY still looks firm on the back of the solid labour market, strong consumer confidence and positive GDP readings, while inflation is seeing regaining upside traction in the near term. Also bolstering the buck emerges its safe haven appeal and the status of ‘global reserve currency’.

US Dollar Index relevant levels

At the moment, the pair is gaining 0.17% at 98.80 and faces the next hurdle at 99.10 (high Sep.12) seconded by 99.37 (2019 high Sep.3) and finally 99.89 (monthly high May 11 2017). On the other hand, a breach of 98.01 (monthly low Sep.6) would aim for 97.74 (55-day SMA) and then to 97.17 (low Aug.23).

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