US Dollar Index gives up gains, back to the 92.60 area
- DXY fades the initial uptick to the 9275/80 band on Thursday.
- Usual weekly Claims will be in the limelight later in the NA session.
- The ECB will hold its monetary policy meeting, focus on PEPP, inflation.
The greenback sheds part of the recent strong advance to the vicinity of the 93.00 mark when gauged by the US Dollar Index (DXY)on Thursday.
US Dollar Index looks to data, ECB
The strong recovery in the index appears to be taking a breather amidst the better tone surrounding the risk-associated universe in the second half of the week.
The leg lower in the dollar also comes in response to the retracement in yields of the US 10-year note to sub-1.32% level after climbing as high as the area above 1.38% earlier in the week, or multi-week tops.
Latest data in the US calendar showed further evidence of a potential slowdown in the economic recovery after the Fed’s Beige Book noted that regional activity diminished its recovery pace somewhat on the back of Delta concerns and unease stemming from supply disruptions and labour shortages. In the same line the IBD/TIPP index – which measures the economic optimism in small businesses – dropped to the pessimistic territory (<50) following the multi-month drop to 48.5 in September.
Further cold water over the recent upbeat performance of the buck came from comments by NY Fed J.Williams, which fell in line with the cautious note from Chief Powell at the Jackson Hole event. He did, however, considerer appropriate to start trimming the bond-purchase programme later this year. On the hawkish side, Atlanta Fed R.Kaplan advocated for the start of the tapering process as soon as possible.
Thursday’s US calendar includes the usual weekly Initial Claims and speeches by FOMC’s M.Bowman and J.Williams, both permanent voters. In addition, the ECB meeting is also expected to grab full attention from market participants.
What to look for around USD
The dollar’s rally shows some signs of respite on Thursday after the index moved to the vicinity of 92.90 in the previous session, where some initial resistance seems to have emerged. Perseverant COVID jitters, doubts surrounding the rebound in the US economic activity and a moderate rebound yields all propped up the recent positive performance in the buck. Extra support for the dollar is also expected to come in the form of high inflation, tapering prospects and the performance of the US economic recovery vs. its peers overseas.
Key events in the US this week: Initial Claims (Thursday) – Producer Prices (Friday).
Eminent issues on the back boiler: Biden’s multi-billion plan to support infrastructure and families. US-China trade conflict under the Biden’s administration. Tapering speculation vs. economic recovery. US real interest rates vs. Europe. Debt ceiling debate. Geopolitical risks stemming from Afghanistan.
US Dollar Index relevant levels
Now, the index is retreating 0.07% at 92.63 and a break above 92.86 (monthly high Sep.8) would open the door to 93.18 (high Aug.27) and then 93.72 (2021 high Aug.20). On the flip side, the next down barrier emerges at 91.94 (monthly low Sep.3) followed by 91.78 (monthly low Jul.30) and finally 91.67 (100-day SMA).