The US Dollar Index (DXY), which tracks the Greenback against a basket of 6 rival currencies, kicked off the new week with a positive note and seems in continuation of its recent bounce from the lowest level since early February reached last Wednesday, April 5. This marks the fourth successive day of positive move of the greenback, though it lacks some of the bullish conviction amid the uncertainty over the Federal Reserve’s (Fed) rate-hike path.
The Non-farm payroll showed that the US economy added 236K new positions in spring against market assumptions for a perusing of 240K. Moreover, the jobless rate edged down to 3.5% from 3.6%, while average hourly earnings rose 0.3% during March. The yearly compensation gains, in the interim, eased back, however remain too high to ever be predictable with the Federal Reserve’s 2% inflation target and backing possibilities for aggressive hikes.
This week’s US economic data is likely to determine the upcoming monetary policy for the FED. The US CPI data is to be released on Wednesday. The year on year CPI is expected to decline as per the last eight reports, and the MoM is also forecasted to show weakness, however the Core CPI will be key, economist expect to be at 0.4%, and the YoY core CPI at 5.60% which remains double the rate required over time to ring inflation back to the Fed 2% target. Then later on Friday the retail sales data which is expected to show a decrease in US spending amid the rate hikes by FED.
FED has to date increased its interest rates by 475 basis point since March 2022, and the market is expecting that the rates hikes will soon end, largely due to the fear of hard landing by the US economy and the banking crisis which resulted in the US largely due to aggressive hikes. Hence the upcoming FED policy it is expected that US central bank will increase the interest rate by 25 basis point which will push the rates to 5.25% and will stay the same throughout the year and the rates cuts would probably begin in the year 2024 as per Bloomberg report.