US dollar update

USD dollar Summary

In the face of increasing yields and escalating tensions in the Middle East, the US dollar performed a correction during the last hours. This happened mainly after the speech by US Federal Reserve Chairman Jerome Powell on Thursday.  Jerome Powell suggested that the bond market’s impact has resulted in a tightening of financial conditions. This could, in turn, lessen the necessity for further rate hikes by the Federal Reserve. It’s important to mention that the US 10-year yield has reached 5% for the first time since 2007. Powell also acknowledged the impact of tightening financial conditions but did not rule out the possibility of further tightening due to the strong economy and tight labor markets. While Powell’s tone appeared somewhat dovish, it’s clear that the door to further tightening hasn’t been closed. Currently, the market anticipates that the Fed will maintain interest rates at its upcoming meeting on November 1.

During an interview with CNBC today, Atlanta Federal Reserve President Raphael Bostic expressed his belief that the US central bank is unlikely to reduce the policy rate until at least the middle of the following year. Bostic was asked when the Fed would cut rates. “When we get really close to 2%,” he replied. Pressed for a date, Bostic added, “So I would say late 2024.”

The USD Index remains above 106 but it has a loss of 0.30% compared to the previous week’s close price. Next week contains more impactful announcements for the US economy such as the PMI indicators, the GDP, and the personal consumption expenditures.


Market Views & Opinions

The view of ING regarding Powell’s speech is the following: Powell’s speech yesterday was perceived as dovish and left the dollar a bit weaker. The greenback continues to draw smaller benefits from strong US data and high rate advantage than it should, likely due to its overbought status, but upside risks remain predominant in our view.As per the dollar, ING says “On balance, the dollar still looks more likely to rise in the short term than fall further. The US calendar is quiet today, we have two Fed speakers to monitor: Patrick Harker and Loretta Mester.

Scotiabank underlines that in terms of chart analysis, the modestly lower close of the US Dollar Index on Thursday reflects a somewhat diminished strength in the overall performance, especially when compared to its peak in late September. Scotiabank also says that if the index falls below 105.50, it may indicate a further decline in the currency’s value.



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.

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