The U.S. Dollar Index Holds Ground amid Central Bank Moves

The U.S. Dollar Index (DXY) is trading nearly 0.28% lower today. However, the index remains about 1.9% higher this month amid a slew of macroeconomic data and global central bank narratives.

In the U.S., initial jobless claims increased by 25,000 to 214,000 for the week ended January 20. In the fourth quarter, GDP came in stronger than expectations at a rate of 3.3% on the back of resilient consumer spending. Further, growth in the core personal consumption expenditure price index moderated to 2.9%. The metric boosted the case for a soft landing.

In China, moves to slash bank reserve ratios and interest rates could mean limited upside for the Yuan as the country’s authorities look to support its economy. Japan is largely expected to opt for a rate hike over the coming months. However, any surprise from the Bank of Japan could dash hopes of a rally in the Yen.

Meanwhile, the European Central Bank has stuck to record high interest rates and its intention to fight inflation. The bank feels that discussing rate cuts is still some time away. However, while traders anticipate a rate cut in Europe over the coming months, shipping disruption-induced inflation could play spoilsport. 

The U.S. Dollar is showing signs of weakness amid these developments. In the short term, the DXY faces resistance at the 103.8 level.

Source: TradingView

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