29/09/2023
US dollar update
USD dollar Summary
A report from the Commerce Department indicated that in August, the Personal Consumption Expenditures (PCE) price index, which is regarded as the Federal Reserve’s favored measure of inflation, increased by 0.4%. This was slightly below the expected rise of 0.5%. When we exclude the more volatile food and energy elements, the core PCE price index saw a 0.1% increase in August, falling short of the anticipated 0.2% increase.
Following the release of this report, the US Dollar Index is currently moving at 105.49 with significant losses for the second consecutive day although it performs a mild bullish reaction. In contrast, the yield on the 10-year US Treasury bond was in the negative region at approximately 4.53%, and futures for US stock indices were showing gains (SP500 0.7% – NASDAQ100 0.95%).
The recent strength of the US dollar on a global scale can be attributed to several factors. One key factor is a bullish outlook for the US dollar, supported by robust economic data from the Federal Reserve. At the same time, concerns about a potential recession in the Eurozone and lackluster economic data from Asia have contributed to the dollar’s ascent.
This prolonged uptrend in the dollar index, the longest in the past nine years, is primarily driven by the expectation that the Federal Reserve will maintain elevated interest rates through 2024. Additionally, the US economy has demonstrated greater resilience compared to other economies, benefiting from positive trends in employment, inflation, and energy prices.
Market Views & Opinions
According to ING “The strength of the US dollar is not easily shaken, even though a softening of US economic data is typically required for a reversal.” and “Although a US government shutdown could theoretically be negative for the dollar due to its impact on economic activity rather than US creditworthiness, it may not be enough to reverse the dollar’s strength.”
Scotia Bank notes that there appears to be a correction in the ongoing strong trend of the US Dollar, and although recent price movements indicate this correction might be underway, the decline in the USD value may be merely a result of temporary flows associated with the end of the month and quarter. Scotia Bank also mentions that a significant move lower in the USD generally will very likely require a major shift in longer term rate differentials against the USD.
IMPORTANT DISCLAIMER
The information in this report is of a general nature only. It is not a piece of personal financial advice. It does not take into account your objectives, financial situation, and personal needs.
a-Quant is not responsible for your actions and recommends you contact a licensed financial advisor before acting on any information contained in this general information report.
