- The US dollar index hit an 11-week high after rising sharply for the first time in a month on the previous day.
- US statistics are generally positive, with hawkish comments from mid-level Fed officials giving hope to DXY buyers.
- Fed Chair Powell’s speech has been spotlighted as a refusal to cut rates and an advocacy of “higher long-term rates” to keep the US dollar strong.
- US mid-cap data and yields should also entertain intraday traders.
The US dollar index (DXY) rose to an 11-week high as markets geared up for Fed Chairman Jerome Powell’s speech at the Jackson Hole symposium early Friday morning. Recent U.S. statistics and statements from Federal Reserve policymakers also help guide the greenbacks against the six major currencies. This pushed DXY up to around 104.17 at the time of writing, its highest since June 7.
After witnessing a slump in August’s monthly PMI, the US economic calendar showed mostly positive signs on Thursday. That said, US durable goods orders in July were -5.2% m/m, -4.0% expected and 4.4% (revised) growth, marking the biggest drop since April 2020. However, durable goods orders (excluding transportation) recorded a positive surprise of 0.5% versus market expectations and the previous reading of 0.2%. In addition, orders for non-defense capital goods, excluding aircraft, also improved to 0.1%, in line with analyst forecasts compared with -0.4% in June.
In addition, the Chicago Fed National Activity Index improved to 0.12 in July from -0.33, while the Kansas Fed Manufacturing Activity Index in August was 12.0, down from -20.0. Similarly, weekly data on initial and continued unemployment claims eased, suggesting a positive employment situation.
Given the data, former St. Louis Fed President James Bullard backed up the strength of the US dollar with his hawkish remarks. “A re-acceleration in inflation could put upward pressure on inflation, making it impossible for the Fed to start cutting rates any time soon,” Bullard said in an interview with Bloomberg. While Bullard is hawkish, Philadelphia Fed President Patrick Harker has signaled the end of the rate hike trajectory and Boston Fed President Susan Collins has defended a “higher for longer” bias in rates.
China’s commerce ministry said in a statement on Thursday that “China will take its position on economic and trade concerns,” while adding that it would also urge financial institutions to expand credit to businesses, boosting U.S.-China optimism elsewhere. perspective seems to have faded. China’s Ministry of Commerce has also urged the United States to halt possible arms sales to Taiwan, but this will not add to geopolitical tensions when US Commerce Secretary Gina Raimond visits Beijing next week. concerns arose.
As a result, pre-event unease joins the China issue, underpinning US dollar haven demand. However, the weak performance of US Treasuries has yielded around 4.25% at the time of this writing, joining softly bid S&P 500 futures to test the DXY bulls.
Looking ahead, the hawkish nature of Fed Chair Powell will raise hopes for dollar index bulls unless he hints at a rate cut next year.
With a clear upside break of key resistance levels that have been stretched since early March and now near 103.50 providing immediate support, US Dollar Index (DXY) bulls are headed for May’s peak of 104.70. Become.