- DXY is around 103.95 when the market morale is still fragile.
- Traders Eye Wednesday US CPI DATA to guide fresh market.
- Nasdak slides 3.3 %, and withdraws more wider shares.
The US dollar (USD) remains under pressure on Monday, as DXY hovers around 103.95, and is fighting to find traction after a sharp decrease last week. On Friday, the Federal Reserve Chairman (FERED) has released the latest statements of Jerome Powell on Friday that the central bank does not see any urgent need to control policy at the present time, although cases of economic uncertainty are growing. Meanwhile, the Nasdaq Stock Exchange faces losses in the heavy market, a decrease of 3.3 %, as investors remain cautious before the main inflation data of the United States (the United States) due to the middle of the week.
Daily Digest Market Movers: Fed in Focus as it is waving in the consumer price index
- Market participants are preparing to issue a consumer price index in February on Wednesday, who are expected to provide basic visions in inflation directions.
- The federal reserve enters the period of obfuscation before the March 19 meeting, which limits the central bank’s suspension for this week.
- On Friday, the Federal Reserve Chairman Jerome Powell repeated that the Federal Reserve remains patient and does not see an urgent need to act, preferring to wait for additional economic data before making any changes in politics.
- American stocks face a sharp correction, with NASDAC losses, a decrease of 3.3 %.
- The CME Fedwatch tool indicates the majority of the rates that the rates will remain at the current levels in May, while the June average expectations have increased significantly.
- A while ago, the media outrage, the Federal Reserve Index decreased on the daily chart towards a neutral ground, which could also explain the decline in the US dollar.
Technical expectations DXY: Support Test near 103.50
The US dollar index (DXY) settles less than 104.00, and is unified after a sharp drop last week. Simple moving averages for 20 days and 100 days (SMA) confirmed a declining intersection near 107.00, which enhances the negative direction. The RSI is still near the sales lands, indicating the possibility of a short -term recovery. Meanwhile, the difference in the moving average rapprochement (MACD) remains a decrease, indicating more risks of the negative aspect unless buyers are not taken at near support levels. If the DXY fails to restore 104.50, the next support is seen near 103.30, which may determine whether the deeper decline is revealed.
Common questions about inflation
Inflation measures an increase in the price of a representative basket for goods and services. The main inflation is usually expressed as a change in percentage on a month on a monthly (illiterate) basis on an annual (annual) basis. Basic inflation excludes more volatile elements such as food and fuel that can fluctuate due to geopolitical and seasonal factors. The basic inflation is the number that economists focus on and is the level targeted by central banks, which are assigned to maintaining inflation at a controlled level, and is usually about 2 %.
Consumer price index (CPI) measures changing commodity and services basket prices over a period of time. It is usually expressed as changing a percentage on a month basis on a monthly (illiterate) basis and on an annual basis (YOY). Core CPI is the number targeted by central banks as it excludes food and flying fuel inputs. When the basic consumer price index rises above 2 %, it usually leads to high interest rates and vice versa when less than 2 % is less than 2 %. Since high interest rates are positive for the currency, high inflation usually leads to a stronger currency. The opposite is true when the inflation falls.
Although it may seem intuitive, high inflation in a country pays the value of its currency and vice versa to reduce inflation. This is because the central bank usually raises interest rates to combat higher inflation, which attracts more global capital flows from investors looking for a profitable place to enter their money.
In the past, gold was the asset investors turned in times of high inflation because it maintained its value, and while investors will often buy gold for its safe properties in times of extremist turmoil in the market, this is not the case most of the time. This is because when inflation is high, central banks will put interest rates to combat them. The highest interest rates are negative for gold because it increases the costs of maintaining gold in assets that bear interest or placing money in the calculation of cash deposits. On the other hand, low inflation tends to be positive for gold because it leads to low interest rates, making the bright metal a more applicable investment alternative.
