The USD Index

The USD Index, which tracks the performance of the greenback, retains its bullish stance, closing the week near the 103.60 level.

The USD Index continues to show gains for the fourth consecutive session on Friday, encountering resistance around the 103.60/65 range, a level last observed in mid-March.

Investors remain focused on the potential bipartisan agreement concerning the debt ceiling issue, which could materialize in the coming days, as per the latest reports.

Moreover, robust recent data from US economic indicators, particularly the weekly labor statistics, support the notion that the Federal Reserve may consider raising interest rates in June instead of pausing its tightening cycle.

Dallas Fed L. Logan expressed on Thursday that the recent data does not warrant a halt, and CME Group’s FedWatch Tool indicates a 37% probability of another 25 bps rate hike, up from around 15% a week ago.

With no major US data releases scheduled, market participants are eagerly following comments from NY Fed’s J. Williams (permanent voter, centrist) and FOMC Governor M. Bowman (permanent voter, centrist). Additionally, Chair J. Powell will be part of a discussion panel alongside former Fed Chief B. Bernanke.

The USD Index aims to build on its weekly gains and surpass the 103.00 resistance level on Friday, reaching multi-week highs.

The index successfully breaks away from the recent period of consolidation, while overcoming initial weakness triggered by indications that the Fed may pause its normalization process soon. However, the future direction of monetary policy hinges on critical fundamentals, primarily employment and inflation.

The potential factors favoring a pause by the Fed include persisting disinflation, despite consumer prices remaining above the target, early signs of weakness in the labor market, a loss of economic momentum, and ongoing uncertainties surrounding the US banking sector.


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