US Dollar Index: DXY grinds near 102.00 as recession fears underpin haven demand ahead of US NFP
|- US Dollar Index remains inactive amid Good Friday holiday, pares weekly losses of late.
- Downbeat US data, dovish Fed bets keep DXY sellers hopeful ahead of the key employment report.
- Recession woes put a floor under the prices as Fed’s preferred economic indicator signals slowdown.
US Dollar Index licks its wounds around 102.00 as global markets turn inactive amid the Good Friday holiday at major bourses. Also restricting the moves of the US Dollar’s gauge versus the six major currencies is the cautious mood ahead of the all-important US employment data for March.
The DXY has been in jeopardy of late as downbeat US statistics, especially concerning employment, contrast with the haven demand amid recession fears and geopolitical woes. However, dovish Fed bets keep a tab on the US Dollar Index as the key data loom.
On Thursday, US Initial Jobless Claims improved to 228K for the week ended on March 31 versus 200K expected and upwardly revised 246K prior. It’s worth noting that the Challenger Job Cuts for the said month rose to 89.703K from 77.77K prior. Previously, US JOLTS Job Openings dropped to the 19-month low in February while the ADP Employment Change for March also disappointed markets with 145K figures. Further, the US ISM Services PMI for March also amplified pessimism as it dropped to 51.2 versus 54.5 expected and 55.1 prior.
With the disappointing US data, the Federal Reserve’s (Fed) preferred gauge of economic health cited the recession woes and put a floor under the DXY prices. “Research from the Fed has argued that the ‘near-term forward spread’ comparing the forward rate on Treasury bills 18 months from now with the current yield on a three-month Treasury bill was the most reliable bond market signal of an imminent economic contraction,” per Reuters.
It’s worth mentioning that the CME’s FedWatch Tool suggests a 45% chance of no Fed action in May.
Apart from the aforementioned catalysts, the geopolitical concerns surrounding China and North Korea also contribute to the US Dollar’s safe-haven demand.
Against this backdrop, Wall Street closed with minor gains and so did the yields as traders brace for the all-important US employment data. With this, the market’s sentiment remains dicey and allows the US Dollar to grind higher.
Moving on, DXY may witness lackluster moves ahead of today’s jobs report for March. Market forecasts suggest a softer print of the headline Nonfarm Payrolls (NFP), to 240K from 311K prior, as well as no change in the Unemployment Rate of 3.6%. However, the mixed expectations for the Average Hourly Earnings make the outcome even more interesting.
Technical analysis
Thursday’s Doji candlestick joins sustained trading below the one-month-old resistance line, around 102.40 by the press time, to keep US Dollar Index bears hopeful.
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