The dollar remains stable in the negative price range, trading at 103.488, down by 0.282 or -0.27% in morning transactions on Thursday, but within a narrow range.
Traders are reducing their positions ahead of key events and data releases tomorrow, particularly the crucial non-farm payroll data and the speech by Federal Reserve Chair Powell.
This comes after weaker-than-expected U.S. services Purchasing Managers’ Index (PMI) figures for February were released on Tuesday, dampening confidence in the dollar.
In the absence of clear market momentum, daily conditions still lack a definitive direction, relying on fundamentals, news, and data to drive the market today.
Chair Powell is expected to reiterate, in his congressional testimony, the stance that the central bank will await more data before deciding on monetary policy easing.
Core inflation remains elevated, making it unlikely to impact expectations for future monetary policy. Currently, a 60% probability exists for the first interest rate cut in June.
The ongoing People’s National Congress data and figures from China have significantly weakened and dispersed markets. Market sentiment has not been optimistic about the stimulus package designed to boost growth and the economy in China. This has fueled risk aversion across all sectors, driving gold and Bitcoin to record highs.
In my view, Powell’s testimony will likely signal that the current interest rate may have peaked in this tightening cycle. The Fed will approach interest rate cuts cautiously, highlighting the ongoing battle against inflation. The commitment to achieving sustainable movement towards the 2% inflation target will remain steadfast before considering any interest rate cuts. This may negatively impact gold prices and support the dollar in the short term.
After adjusting expectations based on Powell’s tone and content, investors may reconsider their expectations regarding interest rate cuts. Earlier predictions leaned towards early June for rate cuts, but recent statements indicate a more data-dependent approach, with no clear timeline for policy easing.
In addition to the current economic picture, the ADP employment report revealed that private companies added 140,000 jobs last month, slightly below expectations but still indicating steady employment growth. These data points are crucial factors influencing Federal Reserve policy decisions, adding volatility to the dollar’s exchange rate.
In the short term, the U.S. dollar may continue to exhibit modest downward trends, driven by the Federal Reserve’s cautious approach to interest rate cuts and continued focus on controlling inflation. The upcoming meeting of the Senate Banking Committee and other economic data releases will be crucial in shaping future market expectations and the direction of the dollar index in the near and medium term.
