Dollar weakened on absence of guidance in Powell’s speech

The US dollar is weakening as Jerome Powell, the chairman of the Federal Reserve, gave a speech devoid of any mention of monetary policy or guidance.

Traders are beginning to paint a picture of the US and global economies as the earnings season draws to a close. People’s finances are being negatively impacted by the current elevated rate environment, and there is a greater chance that the US and the rest of the world will experience a recession at the same time.

Following his speech later this week, Fed Chairman Powell will be watched by traders for cues and direction. The Mortgage Bankers Association (MBA) released the Mortgage Applications index, and the US Wholesale Inventories showed a 0.2% increase. Around 18:00 GMT, the US Treasury will attempt to distribute a 10-year note in the markets. Two Fed speakers are scheduled to speak at the conclusion of the session.

Europe and the US are marginally in the green, but Asian stocks are still down. Better than anticipated profits from the top three US retail discounters are the cause of the depressed mood; this indicates that US consumers are searching for less expensive options rather than paying full price for goods and services.

Markets are pricing in a 90.4% chance that the Federal Reserve will maintain interest rates at its meeting in December, according to the CME Group’s FedWatch Tool. After the volatility of the previous week, the benchmark 10-year US Treasury yield is trading at 4.55%, showing signs of calm.

The US dollar has recovered to its previous level on Wednesday, helped by some inflow of capital from investors seeking safe havens. The DXY was searching for support around 105.00, and any upheaval in world markets might cause a sharp reversal in favour of safe-haven inflows into the US Dollar. It would make sense to first rise to 105.85, a crucial level from March 2023.

There is still a line in the sand at 105.10 on the downside, but if the DXY breaks below it, a large air pocket will open up, with 104.00 serving as the first significant level where the 100-day Simple Moving Average can provide some support.