- The US dollar outside the session is low against most of their main peers.
- US President Trump provides more comments that the customs tariffs on China may not be finally imposed.
- The US dollar index (DXY) is still trading less than 108.00 despite a small bounce of the lowest level this week.
The US dollar index (DXY), which tracks the performance of the US dollar for six different major currencies, exceeds 107.50, although it is still facing a loss inside Friday after US President Donald Trump left comments the previous day doubts about the application of definitions to China . The comments came after Trump received a phone call to Chinese President Xi Jinping. Meanwhile, the Bank of Japan collected interest rates by 25 basis points, which led to great losses to the US dollar (USD) against the Japanese yen (JPY).
On the Economic Data Front, Markit has already released preliminary readings for the managers of Germany (PMI) for the month of January, with some strong optimistic numbers, which increases the strength of more euro (EUR) against the US dollar (USD). Later this Friday, the United States will receive the initial S& P Global PMi readings in the same month. Michigan University will be closed today with the final reading of the January morale index for January.
Daily Digest Market Movers: Will and can the United States excel?
- US President Donald Trump issued comments about his phone call to Chinese President Xi Jinping. He surprised the markets by saying that he did not want to impose a tariff on China, Bloomberg said.
- US President Trump commented on the Federal Reserve and US Prices, stressing that he will demand an immediate reduction in interest rates in the United States, according to Bloomberg’s reports.
- Germany witnessed its initial services jumped to 52.5 in January, overcoming the estimate of 51.0 and above 51.2. The complex purchasing directors index managed to get out of shrinkage, reaching 50.1 and hitting the expected 48.2 and 48.0.
- At 14:45 GMT, the United States will get the initial purchasing managers for Jan GLOBAL:
- It is expected to reduce services to 56.5, which comes from 56.8 in final reading in December.
- Manufacturing is expected to remain in a decrease in 49.6, coming from 49.4.
- At 15:00 GMT, the final reading of the University of Michigan is expected to remain for the consumer morale index for the month of January, stable at 73.2. It is also scheduled to remain an inflation expectation component for 5 years unchanged at 3.3 %.
- The shares, with China and Europe, have been mixed in positive lands where markets put the risk of tariffs on Trump. However, American stocks look slow and an apartment trade.
- The CME Fedwatch tool records a 52.2 % chance that interest rates remain unchanged at the current levels at the May meeting, indicating a reduction in prices in June. Expectations are that the Federal Reserve (Fed) will continue to rely on data with uncertainty that may affect inflation during US President Donald Trump’s term.
- The return in the United States is traded for 10 years about 4.654 %, which led to a weak performance that was seen earlier this week by 4.528 % and still has a long way to return to the highest level last year last week by 4.807 %.
Technical analysis of the US dollar index: Is this weakness?
The US dollar index (DXY) takes some punches and goes down, along with the US yield. Although US President Trump may suddenly relieve his position on the definitions, he is still early in his mandate to exclude any tariff application to China and other countries. The risk of the tail is formed, as the markets began to reduce the actual position, which may still see the US dollar gathering if Trump slapped the definitions of China.
DXY cut his work to recover to the levels seen at the beginning of this week. First, the large psychological level should be recovered at 108.00. From there, 109.29 (July 14, 2022, the height and high direction line) is located next to the losses you incur again this week. Moreover, the next ups in the next upward trend before progress remains more at 110.79 (September 7, 2022, high).
On the negative side, the convergence of the highest level on October 3, 2023 and the simple moving average for 55 days (SMA) should be about 107.50 dual safety features to support the DXY price. Currently, this appears to be the RSI indicator (RSI) still has space to the negative side. Thus, search for 106.52 or even 105.89 as better levels for the US dollar bulls to engage in reflection.
US dollar index: daily chart
Common questions among central banks
Central banks have a major mandate is to ensure that there is a price stability in a country or region. Economics are constantly facing inflation or contraction when the prices of some goods and services fluctuate. High prices for the same goods mean inflation, and the continuous reduction of the same goods means shrinkage. The central bank’s mission is to maintain demand for queue by adjusting the policy price. For the largest central banks such as the American Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BOE), the mandate is to maintain inflation approximately 2 %.
The central bank has one important tool at its disposal to obtain inflation higher or less, and this is by changing the standard policy price, known as the interest rate. In the previous moments, the Central Bank will issue a statement of its policy price and provide an additional reason about the reason that remains or changes (cutting or walking). Local banks will adjust their savings rates and their lending rates accordingly, which in turn will make it difficult or easier for people to gain their savings or companies to obtain loans and provide investments in their business. When the central bank raises interest rates significantly, this cash tightening is called. When you cut its standard price, it is called cash reduction.
The central bank is often political independent. Members of the Central Bank Policy Council pass through a series of paintings and sessions before being appointed to the Policy Council seat. Every member of this council is often a specific condemnation of how to control the central bank for inflation and subsequent monetary policy. Members who want a very loose monetary policy, with low cheap lending rates, are called to increase the economy significantly while they are satisfied with a slightly higher vision of inflation than 2 %, “doves”. Members who want to see higher rates to reward savings and the desire to keep lighting on inflation at all times “hawks” will not be rest until inflation is at 2 % or less than 2 %.
Usually, there is a president or president who leads each meeting, who needs to create a consensus between hawks or doves and has the last saying when this is divided into a vote to avoid a 50-50 tie about whether the current must be modified. The president will often deliver speeches that can be followed directly, as the current monetary position and expectations are connected. The central bank will try to push its monetary policy forward without operating violent fluctuations in prices or shares or currency. All members of the central bank will direct their position towards the markets before the policy meeting occurred. A few days before a policy meeting was held until the new policy is connected, members are prevented from speaking publicly. This is called the obstruction period.