The U.S Dollar Index (DXY) is nearly 2% higher so far this month as U.S. shoppers once again proved their resilience and clouds of uncertainty continued to gather over hopes of any rapid rate cuts.
Yields on the 2-year and the 10-year Treasuries have also climbed to 4.41% and 4.19%, respectively, so far this month. Additionally, lower jobless claims have continued to point to steady strength in the job market despite the recent barrage of job cuts at major tech names.
The earthquakes in Japan have knocked some wind out of the Yen this year. The Euro is also struggling. As central bankers on both sides of the Atlantic have indicated a reluctance to acquiesce to the market’s bets of sharp rate cuts, the outlook for the Dollar remains bullish in the short term.
Further, tensions in the Middle East are widening after the exchange of missiles between Iran and Pakistan. The undeterred attacks on ships in the Red Sea are already appearing to put a strain on supply chains from Europe to China. While China’s economic juggernaut shows signs of weakness, the possibility of regulatory intervention to prop up their currencies across multiple countries remains a not-so-distant possibility.
Meanwhile, the next trajectory for DXY could be decided by how the index reacts at the 103.85 level.
Source: TradingView
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