- President-elect Donald Trump is expected to unveil a set of executive directives designed to spur fiscal, tariff and stimulus measures.
- Strong housing numbers, including higher building permits and construction starts, indicate that the U.S. economy remains on solid footing in the new year.
- Markets are weighing the evidence of new Fed officials.
The US dollar consolidates further at current levels on Friday, with the US Dollar Index (DXY) stable around 109.00 and looking for direction. Markets were left scratching their heads following comments from the Fed’s Waller suggesting a March rate cut is still on the table as markets evaluate new low-level data ahead of Trump’s inauguration.
Daily summary of market drivers: Dollar regains some strength ahead of Trump inauguration and Fed signals
- Fed Governor Christopher Waller struck a more pessimistic tone, highlighting positive inflation outcomes that may warrant a near-term rate cut, and noting that a rate cut in March remains a possibility if incoming data supports further rate moderation.
- Treasury Secretary nominee Scott Besent stressed the need to maintain the US dollar’s status as a global reserve currency and defended the idea of ​​an independent Federal Reserve Bank, while also noting that any transmission from tariffs to consumer prices might be partially offset by exchange rate shifts. .
- On the data front, soft data including building permits and housing starts beat many analysts’ expectations, while industrial output rebounded significantly, underscoring continued US economic momentum.
- Stock markets remain buoyant, with US stocks rising more than 1% on the day, which may reflect optimism about the new administration’s aggressive policy agenda.
- The CME FedWatch tool shows a roughly 97% chance that interest rates will remain on hold at the next policy meeting, as the central bank waits to interpret new data and evolving political factors.
DXY Technical Outlook: Bouncing off profit taking, eyeing multi-year highs
After profit-taking briefly pulled the dollar lower, the US Dollar Index was able to recover to the area above 109.20. Despite the intermittent sell-off, the DXY remains near multi-year highs as fundamental indicators continue to support the dollar’s upside. It is worth noting that the 20-day simple moving average repelled sellers, as it served as a strong foothold for bulls.
While a short-term decline is possible if new data or political announcements disappoint, the prevailing technical structure suggests that buyers may quickly re-emerge to defend the dollar’s momentum.
