25/07/2024
US dollar update
Summary
The recent performance and outlook of the US Dollar Index (DXY) have been influenced by a series of economic indicators and market expectations.
As of July 25, 2024, the DXY is trading near 104, with slight fluctuations noted during the European session. The Index fell below 104.3, marking a decline for the second consecutive session as investors anticipated crucial economic data. The Q2 GDP is expected to show an annualized growth of 2%, up from 1.4%, surpassing the Fed’s forecast of 1.8%. This data, to be released at 12:30 GMT, will provide insights into the economy’s health. Additionally, the GDP Price Index is estimated to have decreased to 2.6% from the previous 3.1%, signaling a reduction in inflationary pressures. Durable Goods Orders are predicted to increase by 0.3% in June, compared to a 0.1% rise in May. The Core Personal Consumption Expenditure (PCE) Price Index for June is estimated to have slowed to 2.5% from May’s 2.6%, with a monthly increase of 0.1%. This deceleration might reinforce expectations for a Fed rate cut in September if inflationary pressures continue to ease.
The market remains risk-averse due to uncertainties surrounding the upcoming US presidential elections, reflected in the retreat of S&P 500 futures and a drop in 10-year US Treasury yields to 4.28%.
Markets anticipate a 25 basis point rate cut by the Fed in September, with at least one more reduction expected by year-end. Lower interest rates are projected to weaken the USD as they reduce Treasury yields, making US assets less attractive. This has led to a depreciation against the yen, amid speculation of a rate hike by the Bank of Japan, while the USD strengthened against the Australian and New Zealand dollars as investors moved away from riskier assets.
In summary, the US Dollar Index’s recent trajectory and future outlook are being shaped by a mix of anticipated economic data releases, inflation trends, interest rate expectations, and technical market factors. The interplay of these elements will continue to influence the DXY’s performance in the coming weeks.
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.
