How the US Dollar Index Benefited from the Beginning of the Year and Potential Upcoming Influences:

We are witnessing a crucial and highly significant financial week, where the fate of many financial instruments will be determined. In this report, we highlight the most important factors that the US Dollar Index has experienced from the beginning of 2024 until now, and the potential influences that may qualify prices for further ascent. We also explore how these influences could be overshadowed by negative alternatives, leading to a potential decline in the index during the current year.

Topic

What the US Dollar Index has Presented from the Beginning of the Year until Now

Possible Scenarios for the Federal Reserve Week

What the US Dollar Index has Presented from the Beginning of the Year until Now:

The US Dollar Index started 2024 with excellent positivity, facing a downward wave that pushed prices to visit the psychological support level of 100.25. Several economic data points contributed to providing positive momentum for the index, including:

US Employment Data for December:

Unemployment in the U.S. stabilized around 3.7%, and despite market expectations pointing towards positive unemployment figures and an increase to 3.8%, no new developments were presented as unemployment remained unchanged.
Private nonfarm payrolls showed a significant positive surprise by offering 216,000 jobs, while expectations at that time indicated a negative presentation of only 177,000 jobs.
Hourly wage rates for December presented a positive increase of 0.4%, exceeding the preceding reading of around 0.3%.

The labor market data is seen as a barrier to a decline in U.S. inflation. Federal Reserve Chair Jerome Powell has signaled victory over high inflation and the possibility of starting interest rate cuts during the current year.

US Consumer Price Index (CPI) Data:

Annual Consumer Price Index (CPI) showed positivity, contrary to expectations indicating 3.2%,
and also higher than the previous reading around 3.1%, settling around 3.4%.
Monthly Consumer Price Index increased to 0.3%, contrary to expectations of 0.2%,
presenting higher positivity than the preceding reading around 0.1%.

These indicators signal the resurgence of U.S. inflation concerns, which could prompt major central banks to raise interest rates again.

Gross Domestic Product (GDP) Data:

Gross Domestic Product (GDP) presented a positive reading during the previous week,
higher than expectations indicating 2.0%, settling around 3.3%.
This signals that growth during the current year may surpass Federal Reserve expectations from the last meeting of 2023,
where they expected only 1.4% growth.

Possible Scenarios for the Federal Reserve Week:

It is likely that Jerome Powell, during his upcoming meeting, will be somewhat hawkish,
especially with the positivity of key data viewed by the Federal Reserve (strong labor market, the possibility of inflation rebounding, positive GDP growth).
This may negate the possibility of the Federal Reserve lowering rates in March and may extend the period of keeping interest rates high during the current year.

We will focus on this during the next meeting, and during Powell’s speech, hints about the Fed’s current stance on tightening,
as well as when the Fed might intervene to cut rates and the number of rate cuts they may undertake during 2024.

How the US Dollar Index Benefited from the Beginning of the Year

How the US Dollar Index Benefited from the Beginning of the Year

Related Topics