Market news

25 January 2023

US Dollar Index licks its wounds near 102.00 as DXY traders brace for US GDP, Fed

  • US Dollar Index treads water after a volatile day, eyes third consecutive weekly loss.
  • US activities shrunk in January even if the PMIs moderated, hawkish ECB concerns also weigh on DXY.
  • Fed fund futures signal the policy pivot to be nearer than the US central bank signaled.
  • Advances readings of US Q4 GDP are the key ahead of next week’s FOMC.

US Dollar Index (DXY) treads water around 101.90-95 as it struggles to pause late Tuesday’s pullback from 102.43 amid a sluggish Asian session on Wednesday. In doing so, the greenback’s gauge versus the six major currencies portrays the market’s cautious mood ahead of Thursday’s key US growth numbers and the next week’s Federal Open Market Committee (FOMC) monetary policy meeting.

It’s worth noting that the DXY failed to benefit from the sour sentiment on Tuesday amid mixed concerns surrounding the US activity data. That said, preliminary readings of the US S&P Global Manufacturing PMI for January rose past 46.2 market forecast and 46.1 market expectations with 46.8 figure while the Services PMI followed the suit with the 46.6 figure for the said month, versus 44.5 forecast and 44.7 prior. That said, the S&P Global Composite PMI for January increased to 46.6 from 45.0 prior and the 44.7 consensus, marking the seventh consecutive read below 50. 

Following the US data, the US Dollar Index managed to rise for a brief time before closing in the red. The reason could be linked to the comments from Chief Business Economist at S&P Global Chris Williamson who said, “The US economy has started 2023 on a disappointingly soft note, with business activity contracting sharply again in January."

On the other hand, an easing in the market’s favor for the hawkish Fed moves in the next week also weighed on the DXY. “Fed fund futures see only two more quarter-point rate hikes by the Fed to a peak of around 5% by June, before it starts cutting rates later in the year. The Federal Reserve itself has insisted it still has 75 bps of increases in the pipeline,” said Reuters.

Furthermore, the increasing chatters surrounding the European Central Bank’s (ECB) 50 basis points (bps) rate hike in the next week and upbeat Eurozone PMI data also weigh on the DXY. That said, European Central Bank (ECB) policymaker Gediminas Simkus was the latest to back 50 bps rate hike while the first readings of the Eurozone S&P Global Manufacturing PMI crossed the 48.5 market forecasts and 47.8 previous readouts with 48.8 figure for January. Further, the Services PMI also impressed Euro bulls with 50.7 mark versus 50.2 expected 49.8 prior. With this, the Composite PMI for the bloc increased to 50.2 from 49.3 previous readings and 49.8 market forecasts.

Following the data releases, Chris Williamson, Chief Business Economist at S&P Global said, “A steadying of the Eurozone economy at the start of the years adds to evidence that the region might escape recession.”

Looking forward, a light calendar and the absence of the Fed and the ECB talks ahead of next week’s monetary policies could restrict the DXY moves. However, the bears are likely to keep the reins amid bearish bias surrounding the Federal Reserve, as well as the hawkish concerns about the European Central Bank. That said, the first readings of the US fourth-quarter (Q4) Gross Domestic Product (GDP), up for publishing on Thursday, will be crucial to watch for immediate directions. The reason appears logical due to the next week’s Federal Reserve (Fed) meeting, as well as the talks of the US recession. Forecasts suggest the world’s biggest economy eases with 2.8% annualized growth.

Also read: US Gross Domestic Product Preview: Three reasons to expect a US Dollar-boosting outcome

Technical analysis

Unless crossing the previous monthly low surrounding 103.40, the US Dollar is on the way to the latest swing low near 101.50 ahead of challenging the May 2022 bottom close to 101.30.

 

Market Focus

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

Open Demo Account
I understand and accept the Privacy Policy and agree that my name and contact details can be used by TeleTrade to contact me about the information I have selected.
23 International Awards
Have a question?

We are ready to assist you in every step of your trading experience
by providing 24/5 multilingual customer support.

Follow us

Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.94% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.

© 2011-2023 Teletrade-DJ International Consulting Ltd

This website is operated by Teletrade-DJ International Consulting Ltd, which is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11. Teletrade-DJ International Consulting Ltd is located at 88, Arch. Makarios Avenue, 2nd floor, Nicosia Cyprus.

The company operates in accordance with the Markets in Financial Instruments Directive (MiFID).

The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. Teletrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.

TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.

Please read our full Terms of Use.

To maximise our visitors' browsing experience, TeleTrade uses cookies in our web services. By continuing to browse this site you agree to our use of cookies.

Teletrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.94% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Choose your language/location