US dollar nears 2023 lows on US inflation data reveal recession. has continued to weaken against its major rivals following its early decline
US dollar may have a difficult time mounting a consistent recovery.
The US Dollar suffered significant losses versus its key competitors on Wednesday. Proved unable to overcome the selling pressure on Thursday. With investors see a high likelihood of a few (Fed) rate cuts in the latter part of the year. March inflation statistics from the US appear to be the main cause of the USD depreciation.
According to a study released on Wednesday by the US Bureau of Labor Statistics, (CPI) dropped from 6% in Feb to 5% in March on an annual basis. This result was less than the 5.2% market forecast. Additionally, the Core CPI increased by 0.4% on a Mo to-Mo basis rather than the 0.5% rise that it did in Feb.
Despite the USD decline, interest is focused on the US PPI statistics.
The likelihood of a further 25 basis point Fed rate rise in May remains over 60%. According to the CME Group FedWatch Tool. Even if the Fed decides to raise rates at the forthcoming conference. Markets predict that it will decrease its policy rate return to the target range of 4.75%-5% by Sept.
Following a 0.6% loss on Wednesday, the US Dollar Index, which measures how the USD performance fell as low as 101.50 for the first time since early February. The DXY low for 2023 is 100.82.
The initial phase of the clock to lowering borrowing rates, or the start of the end of rate raise. That appears to indicate a signal from the markets, which are moving quickly to price the Federal Reserve’s upcoming actions.
The biggest economy in the world is going through a “phase of disinflation” which is a bit discouraging but heading in the right direction. The market is purchasing it. Mary Daly, president of the San Francisco Fed, stated on Wednesday that they still need to work on raising interest rates given the solid state of the US economy.
Now. Today, PPI is in focus
The Producer Price Index (PPI) data, which the BLS will issue later in the day. Which is anticipated to decrease from 4.6% on an annual basis in February to 3% in March. The US economic docket will also include the weekly Initial Jobless Claims report from the US Department of Labor.
A new consumer survey from the NY Fed showed early in the week that one-year inflation expectations increased to 4.7% in March. From 4.2% in Feb.
On Monday, NY Fed President John Williams stated, that the problems surrounding the two failed banks in March were not caused by the rate rises. Williams said on Tuesday that since “policy had been brought to a tight posture. Now we must keep an eye on the statistics on retail sales, CPI, etc.
Technical Perspective
DXY seems to be on track to test 101.30, which was a mark significant in both Feb of this year and April and May of last year. The dollar is susceptible to additional decline and may possibly test the psychological threshold of 100. Since the market anticipates at least one rate decrease until the conclusion of the year.
The US dollar has the extra advantage of having a safe-haven appeal in the event that banking sector volatility returns. Or if recession threats pick up speed. The Fed anticipates the possibility of a brief recession in the latter half of the year. According to the most recent predictions. The highest degree of resistance is at 103.00, while the next is at 105.63.
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