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US CPI and FOMC to boost the DXY
The DXY caught support off of the red support range on the 50% Fibo retracement level at 103.97. A stronger or in line with expectations US CPI this week coupled with the Fed maintaining the federal funds rate at 5.50% will allow the DXY to break above the 50-day MA rate of 105.09 and move higher towards the first resistance level of 105.96. Over the longer term a move towards 107.5 is still firmly on the cards.
The Bank of Canada and the European Central Bank (ECB) were the first G7 central banks to diverge from the US Federal reserve after they both cut interest rates by 25 basis points this week. The decision from the ECB came as no surprise to the market off the back of what the ECB described as a logical step due to retreating inflation across the 20-nation euro zone. The dollar index remained relatively muted off the back of the decision however the dollar surged against the major currencies following the stronger than expected US non-farm payroll print of 272 thousand in May, up from 165 thousand in April.
The Fed will deliver their interest rate decision this week and market consensus is for the Fed to keep rates unchanged at 5.50%. The divergence between the Fed and the other major central banks is dollar positive and it further illustrates that the US economy is able to stomach the high interest rate environment while the other majoring economies have started to buckle. The Fed’s rate decision and FOMC statement will thus take center stage this week but the latest US CPI figures for the month of May will also be released along with the US 10-year and 30-year bond auctions.
The Bank of Canada and the European Central Bank (ECB) were the first G7 central banks to diverge from the US Federal reserve after they both cut interest rates by 25 basis points this week. The decision from the ECB came as no surprise to the market off the back of what the ECB described as a logical step due to retreating inflation across the 20-nation euro zone. The dollar index remained relatively muted off the back of the decision however the dollar surged against the major currencies following the stronger than expected US non-farm payroll print of 272 thousand in May, up from 165 thousand in April.
The Fed will deliver their interest rate decision this week and market consensus is for the Fed to keep rates unchanged at 5.50%. The divergence between the Fed and the other major central banks is dollar positive and it further illustrates that the US economy is able to stomach the high interest rate environment while the other majoring economies have started to buckle. The Fed’s rate decision and FOMC statement will thus take center stage this week but the latest US CPI figures for the month of May will also be released along with the US 10-year and 30-year bond auctions.
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