- The DXY trades near 104.30 with muted interest despite broader risk-off flows in markets.
- Focus shifts from tariffs to data with recession fears weighing more than trade threats.
- Key resistance is seen near 104.47, while support clusters just under the 104.00 handle.
The US Dollar Index (DXY), which measures the value of the US Dollar against a basket of currencies, trades flat on Monday and sees limited directional flow, hovering near 104.30. Despite equities tumbling and Gold hitting fresh highs above $3,100, the Greenback remains sidelined. Traders appear more focused on economic signals than trade tensions with Monday’s session marked by expectations around regional manufacturing data and the looming tariff deadline.
Daily digest market movers: US Dollar sidelined amid broader risk-off tone
- US President Donald Trump doubled down on tariffs, stating all countries will face reciprocal duties starting April 2.
- Equities and cryptocurrencies are seeing sharp outflows with investors favoring precious metals like Gold.
- Gold printed a new record high above $3,100 on Monday as safe-haven flows intensified.
- The US Dollar failed to benefit from risk aversion, highlighting diminished sensitivity to tariff headlines.
- Last week’s data showed consumer sentiment slipping and inflation expectations rising, undermining the Greenback.
- Market participants increasingly price in stagnation risks, reducing the appeal of the US Dollar as a haven.
- The spotlight now turns to the March Chicago PMI and Dallas Fed Manufacturing Index for fresh economic signals.
- Weakness in those regional reports could reinforce fears of economic slowdown and pressure the DXY.
- Treasury yields declined as investors flocked to bonds, capping upside potential in the Dollar.
- Bond and equity market behavior signals that broader economic uncertainty outweighs trade noise for now.
Technical analysis
The US Dollar Index is showing mixed technical signals on Monday as it trades near the top of its intraday range. The Moving Average Convergence Divergence (MACD) indicator presents a buy signal despite still being in negative territory, while the longer-term indicators remain bearish: the 100 and 200-day Simple Moving Averages (SMA), as well as the 30-day Exponential Moving Average (EMA), all point downward.
The Commodity Channel Index (CCI) is neutral at 16.955, and the Average Directional Index (ADX) near 29 signals moderate trend strength. Key resistance is seen at 104.334, 104.470, and 104.899, while support is clustered around 104.177, 104.043, and the 20-day SMA at 104.007.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
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