USD Index

The USD Index, measured by DXY, has returned to the low-101.00s at the end of the week, indicating a downward trend for the greenback. Despite Thursday’s advancement, the index failed to sustain momentum and remained in the negative territory, supported by the 101.00 zone. 

The Federal Open Market Committee’s (FOMC) event on Wednesday, which highlighted the possibility of a pause on the hiking cycle as early as the next meeting in June, continues to influence investors. 

The upcoming US jobs report, set to be published later in the North American session, will be critical as the Fed considers future interest rates based on economic data, as emphasized by Chief Powell on Wednesday.

Investors are closely monitoring the index as it trades near the 101.00 zone, reflecting their assessment of the recent FOMC event. The Fed’s recent indications of a possible pause in the normalization process have put downward pressure on the index. 

However, the direction of monetary policy will ultimately be determined by key fundamentals, mainly employment and prices.

There is growing speculation that the Fed will pause its hiking cycle due to persisting disinflation and nascent easing in the labor market, despite consumer prices remaining well above the target. This speculation has only increased amidst steady predictions of a possible recession.


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