The US dollar, as measured by the USD Index (DXY), initiates the new trading week with a strong performance, surpassing the 104.00 level on Monday.
The USD Index is influenced by data and Federal Reserve expectations. It has experienced back-to-back gains, reclaiming levels above 104.00. This rise comes despite positive economic data from China earlier in the Asian session, which failed to ease selling pressure in riskier assets.
At present, there is a high likelihood of the Federal Reserve maintaining its current course at the upcoming June 14 event, with the probability of this scenario estimated around 70% according to the CME Group’s FedWatch Tool.
Looking ahead, traders will closely monitor the release of the ISM Services PMI during the North American session, as well as the final S&P Global Services PMI for May and April’s Factory Orders.
Key Points to Observe Regarding the USD
The USD Index gains momentum and aims to reestablish a bullish outlook above the 104.00 level early in the week.
Meanwhile, expectations of a 25-basis-point interest rate hike at the next Federal Reserve meeting in June have abruptly shifted, despite the ongoing strength of essential US economic indicators such as employment and prices. This reversal has dampened the recent dollar rally and contributed to a decline in US bond yields.
Furthermore, the tightening of credit conditions in response to uncertainties surrounding the US banking sector appears to support the case for the Federal Reserve to pause its tightening cycle.
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