Noor Trends News, Technical Analysis, Educational Tools and Recommendations
US Dollar suffered heavy losses against its rivals on Wednesday. Markets expect the Fed to pause its tightening cycle in June following the latest policy decisions. US Dollar Index holds above 101.00 but the bearish bias stays intact. The dollar continued to weaken against its rivals late Wednesday and the US Dollar Index (DXY) closed the second straight day in negative territory. The USD’s losses remain limited early Thursday following the latest data releases but the currency is having a difficult time staging a convincing recovery against its major rivals.
Although the Fed raised its policy rate by 25 basis points (bps) to the range of 5-5.25% in May as expected, it dropped language saying that it “anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time.” With the immediate reaction to this dovish tone, the USD selloff picked up steam in the late American session on Wednesday.
In the post-meeting press conference, FOMC Chairman Jerome Powell refrained from confirming a pause in rate hikes in June when asked about it. Moreover, Powell noted that it would not be appropriate to cut rates this year given their view that it will take some time for inflation to come down.
Nevertheless, these comments failed to convince markets. According to the CME Group FedWatch Tool, the probability of the US central bank raising its policy rate one more time in June is less than 5%, compared to nearly 40% just a week ago. The benchmark 10-year US Treasury bond yield fell nearly 7% in the previous two days and broke below 3.4%, reflecting the negative impact of dovish Fed bets. The 10-year yield edges higher but stays below 3.4% on Thursday.
Wall Street’s main indexes opened in negative territory after closing in the red on Wednesday. The Dow Jones Industrial Average was down nearly 1% after the opening bell. On Friday, the US Bureau of Labor Statistics’ April jobs report will be watched closely by market participants. Nonfarm Payrolls (NFP) in the US are forecast to rise by 179,000 in April.
